Q1 2024 WesBanco Inc Earnings Call

Good morning, and welcome to the West Banco first quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad after today's presentation.

Operator: Good morning, and welcome to the WesBanco First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to John Iannone, Senior Vice President, Investor and Public Relations. Please go ahead.

There will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to John Ionone Senior Vice President and.

John H. Iannone: Investor and public relations. Please go ahead.

John H. Iannone: Thank you good morning, along the West Bancorp, Inc. 's first quarter 2024 earnings conference call.

John H. Iannone: Thank you. Good morning, and welcome to WesBanco Inc.'s first quarter 2024 earnings conference call. Leading the call today are Jeff Jackson, President and Chief Executive Officer, and Dan Weiss, 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. Cautionary statements about this information and reconciliations of non-GAAP measures are included in our earnings-related materials issued yesterday afternoon, as well as in our other SEC filings and investor materials.

John H. Iannone: Leading the call today are Jeff Jackson.

John H. Iannone: President and Chief Executive Officer, and Dan Weiss Executive Vice President and Chief Financial Officer.

John H. Iannone: Today's call an archive of which will be available on our website for one year you paid it's forward looking information.

John H. Iannone: 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.

John H. Iannone: These materials are available on the Investor Relations section of our website, WesBanco.com. All statements speak only as of April 24th, 2024, and WesBanco undertakes no obligation to update them. I would now like to turn the call over to Jeff.

He's worked here. He also are available on the Investor Relations section of our website Wesbanco Dot com.

John H. Iannone: All statements speak only as of April 24, 2024.

John H. Iannone: West Banco undertakes no obligation to update them.

John H. Iannone: I would now like to turn the call over to Jeff Jeff.

Jeffrey H. Jackson: Thanks, John and good morning.

Jeffrey H. Jackson: Thanks, John, and good morning. On today's call, we will review our results for the first quarter of 2024 and provide an update on our operations and current 2024 outlook. Key takeaways from the call today are... Continued strong deposit and loan growth combined with good progress on new fee income opportunities. A sustained focus on controlling discretionary costs. We remain well capitalized with solid credit quality and liquidity. Our first quarter results marked a strong start to 2024.

Jeffrey H. Jackson: On today's call, we will review our results for the first quarter of 'twenty 'twenty four.

Jeffrey H. Jackson: And provide an update on our operations and current 'twenty 'twenty four outlook.

Jeffrey H. Jackson: Key takeaways from the call today are.

Jeffrey H. Jackson: Continued strong deposit and loan growth combined with good progress on new fee income opportunities.

Jeffrey H. Jackson: A sustained focus on controlling discretionary costs.

Jeffrey H. Jackson: We remain well capitalized with solid credit quality and liquidity.

Our first quarter results marked a strong start to 2024.

Jeffrey H. Jackson: We grew loans and deposits, while smartly managing borrowings.

Jeffrey H. Jackson: We grew loans and deposits while smartly managing borrowings, controlling costs, and advancing our efforts to diversify revenue streams and drive non-interest income growth. For the quarter ending March 31st, 2023, we reported net income available to common shareholders of $33.2 million, and diluted earnings per share of $0.56.

Trolling cough and advancing our efforts to diversify our revenue streams and drive noninterest income growth.

Jeffrey H. Jackson: For the quarter ending March 31 2023.

Jeffrey H. Jackson: We reported net income available to common shareholders of.

Jeffrey H. Jackson: $33 2 million.

Jeffrey H. Jackson: And diluted earnings per share of 56 cents.

Jeffrey H. Jackson: Furthermore, the underlying strength of our financial performance as demonstrated by our return on average tangible common equity of 11%.

Jeffrey H. Jackson: Furthermore, the underlying strength of our financial performance is demonstrated by our return on average tangible common equity of 11%, non-performing assets to total assets of just 0.19%, and a capital position that continues to provide financial and operational flexibility, as demonstrated by our tangible common equity ratio of 7.63%. The key story for the first quarter was our strong deposit growth, which both funded loan growth and paid down borrowings on a sequential quarter basis.

Jeffrey H. Jackson: Nonperforming assets to total assets of just 0.19%.

Jeffrey H. Jackson: And a capital position that continues to provide financial and operational flexibility.

Jeffrey H. Jackson: As demonstrated by our tangible common equity ratio of 7.63%.

Jeffrey H. Jackson: The key story for the first quarter was our strong deposit growth that both funded loan growth and pay down borrowings on a sequential quarter basis.

Jeffrey H. Jackson: We reported deposit growth of 5% year over year, and 10% quarter over quarter annualized across our business consumer and public funds customers.

Jeffrey H. Jackson: We reported deposit growth of 5% year-over-year and 10% quarter-over-quarter annualized across our business, consumer, and public funds customers. This deposit growth funded both our loan growth and the 19% decrease in FHLB borrowings from the fourth quarter of 2023. We remain encouraged by the ability of our teams to grow our deposits. First quarter loan growth was 9% year-over-year and 8% quarter-over-quarter annualized, which was again driven by our commercial and residential lending.

Jeffrey H. Jackson: This deposit growth funded both our loan growth and the 19% decrease in F. H L. B borrowings from the fourth quarter of 2023.

We remain encouraged by the ability of our teams to grow our deposit base.

First quarter loan growth was 9% year over year, and 8% quarter over quarter annualized.

Jeffrey H. Jackson: Which was again driven by our commercial and residential lending teams.

Jeffrey H. Jackson: Total commercial loans increased 9% year-over-year and 10% sequentially annualized, driven by our banker, hiring, and loan production office strategy. Our four newest loan production offices accounted for roughly 20% of the commercial loan growth year to date, as they continue to demonstrate a strong return on investment. Our commercial loan pipeline, as of April 15th, was approximately $1.2 billion. This was a 69% increase from the level at year-end 2023 and roughly flat to March 31st.

Jeffrey H. Jackson: Total commercial loans increased 9% year over year, and 10% sequentially annualized.

Jeffrey H. Jackson: Driven by our banker hiring and loan production office strategies.

Jeffrey H. Jackson: Our four newest loan production offices accounted for roughly 20% of the commercial loan growth year to date.

As they continue to demonstrate a strong return on investment.

Jeffrey H. Jackson: Our commercial loan pipeline as of April 15th was approximately 1.2 billion.

Jeffrey H. Jackson: A 69% increase from the level at year end 2023, and roughly flat to March 31st.

Jeffrey H. Jackson: As our teams continue to find business opportunities to replenish the pipeline that has been driving our strong loan growth, our pipeline highlights the strength of our commercial strategies as our banking teams are able to maintain a billion-dollar pipeline while generating high single-digit loans. In addition, our new loan production offices account for 29% of the current pipeline, with Tennessee continuing to represent a meaningful percentage.

Jeffrey H. Jackson: As our teams continue to find business opportunities to replenish the pipeline that has been driving our strong loan growth.

Jeffrey H. Jackson: Our pipeline highlights the strength of our commercial strategies as our banking teams are able to maintain a billion dollar pipeline, while generating high single digit loan growth.

Jeffrey H. Jackson: In addition, our new loan production offices account for 29% of the current pipeline.

Jeffrey H. Jackson: With Tennessee, continuing to represent a meaningful percentage.

Jeffrey H. Jackson: Based on the ongoing success of our L. P. OS we continue to evaluate opportunities to expand this strategy into new metro markets adjacent to or within our footprint.

Jeffrey H. Jackson: Based on the ongoing success of our LPOs, we continue to evaluate opportunities to expand this strategy into new metro markets adjacent to or within our footprint. Representative of the strong efforts of our teams across our markets is a nice win in our Mid-Atlantic market during the first quarter. A team comprised of commercial bankers, treasury management, and credit associates won a new business relationship from a large financial institution. This win was led by our Mid-Atlantic leadership team, as this company is known for longstanding business partnerships and loyalty to its partners and vendors alike.

Jeffrey H. Jackson: Representative of the strong efforts of our teams across our markets is a nice win in our mid Atlantic market during the first quarter.

Jeffrey H. Jackson: A team comprised of commercial bankers and Treasury management and credit associates, when a new business relationship from a large financial institution.

Jeffrey H. Jackson: This win was led by our mid Atlantic leadership team as.

Jeffrey H. Jackson: As this company is known for long standing business partnerships and loyalty to their partners and vendors alike.

Jeffrey H. Jackson: After a business focus shift by the customer's previous bank Wesbanco earned a complete banking relationship with this premier customer that included both low eight figure deposits and credit facility as well as a full suite of Treasury management products and services.

Jeffrey H. Jackson: After a business-focused shift by the customer's previous bank, WesBanco earned a complete banking relationship with this premier customer that included both low-eight-figure deposits and credit facilities, as well as a full suite of treasury management products and services. Because the customer's business model is complex, it took a coordinated and collaborative effort amongst the team to provide the customer with the ideal solution that would help to optimize their This is yet another example of our commitment to exceptional service and winning complete banking relationships through a deep understanding of a client's needs.

Jeffrey H. Jackson: Because the customer's business model is complex it took a coordinated and collaborative effort amongst the team to provide the customer with the ideal solution that would help to optimize their business model.

Jeffrey H. Jackson: This is yet another example of our commitment to exceptional service and winning complete banking relationships through a deep understanding of our clients' needs.

Jeffrey H. Jackson: As you heard in our customer win example, our Treasury management team is partnering very well with our commercial banking team to help us win deep banking relationships to further highlight the success of this reorganized group into a sales oriented business they sold roughly 300.

Jeffrey H. Jackson: As you heard in our customer win example, our treasury management team is partnering very well with our commercial banking team to help us win deep banking relationships. To further highlight the success of this reorganized group into a sales-oriented business, they sold roughly 300 of our products and services to our business customers during the first quarter, including receivables, payables, reporting, anti-fraud, investment sweep services, and, encouragingly, several multi As I mentioned last quarter, we are making progress on building a strong pipeline for our new Multi-Card and Integrated Payables product, with revenue expected to begin to be generated during the second half of 2024.

Jeffrey H. Jackson: Of our products and services to our business customers during the first quarter, including receivables payables reporting anti fraud investment sweep services and encouragingly several multi card relationships.

Jeffrey H. Jackson: As I mentioned last quarter, we are making progress on building a strong pipeline for our new multi card an integrated payables products.

With revenue expected to begin to be generated during the second half of 'twenty 'twenty four.

Jeffrey H. Jackson: Lastly, we remain diligent on managing expenses.

Jeffrey H. Jackson: Lastly, we remain diligent in managing expenses. While some of the sequential quarter decline was due to the timing of marketing campaigns, our non-interest expenses decreased approximately $2 million from the fourth quarter. We have completed our Retail Transformation Initiative, which focused on ensuring appropriate staffing models for all of our financial centers, including staff reductions and the hiring of business bankers to drive additional growth. We have reduced retail staffing by approximately 100 people.

Jeffrey H. Jackson: While some of the sequential quarter decline was due to the timing of.

Jeffrey H. Jackson: Our marketing campaigns.

Jeffrey H. Jackson: Our non interest expenses decreased approximately $2 million from the fourth quarter.

Jeffrey H. Jackson: We have completed our retail transformation initiative, which focused on ensuring appropriate staffing models for all of our financial centers, including staff and hour reductions and the hiring of business bankers to drive additional growth.

Jeffrey H. Jackson: We have reduced retail staffing by approximately 100 people.

Jeffrey H. Jackson: Over the past year, through a combination of attrition and retirement, we have strategically adjusted operating hours to ensure we are available at peak times for our customers and reducing or eliminating hours when customers do not need our help. As I mentioned last quarter, We are using about half of this savings to grow our business banking program and generate additional revenue through loans and deposits and merchant and treasury management fees. We are in the process of making these.

Jeffrey H. Jackson: Over the past year through a combination of attrition and retirement and have strategically adjusted operating hours to ensure we are available at peak times for our customers and reducing or eliminating hours when customers do not need our help.

Jeffrey H. Jackson: As I mentioned last quarter.

Jeffrey H. Jackson: We are using about half of the savings to grow our business banking program.

Jeffrey H. Jackson: And generate additional revenue through loans and deposits and merchant and Treasury management fees.

Jeffrey H. Jackson: And are in the process of making these hires.

Jeffrey H. Jackson: Yes.

Jeffrey H. Jackson: Furthermore, we continue to seek additional levers to pull to help efficiencies in our functions and drive positive operating leverage. These efforts are still in the early planning stages, and I expect to provide updates on future calls.

Jeffrey H. Jackson: Furthermore, we continue to seek additional levers to pull to help efficiencies in our functions and drive positive operating leverage.

These efforts are still in the early planning stages and I expect to provide updates on future calls.

Jeffrey H. Jackson: Our commitment to customer service sustainable growth strategies and strong credit quality.

Jeffrey H. Jackson: Our commitment to customer service, sustainable growth strategies, and strong credit quality earned us yet another national accolade for this quarter. For the 14th time, WesBanco was named to the Forbes list of best banks in America, which evaluated 10 metrics measuring growth, credit quality, and profitability for the 2023 calendar year, during a year that tested the resilience and adaptability of the banking industry. WesBanco remained a strong and sound financial institution well positioned to serve its customers, communities, and shareholders.

Jeffrey H. Jackson: Earned us yet another national accolade for this quarter.

Jeffrey H. Jackson: For the 14th time Wesbanco was named to the Forbes.

Jeffrey H. Jackson: List of best Banks in America.

Jeffrey H. Jackson: Which evaluated 10 metrics measuring growth credit quality and profitability for the 'twenty to 'twenty three calendar year.

Jeffrey H. Jackson: During a year that tested the resilience and adaptability of the banking industry.

Jeffrey H. Jackson: <unk> remains a strong and sound financial institution, well positioned to serve our customers communities and shareholders.

Jeffrey H. Jackson: This latest accolade reinforces the trust and confidence our customers, placing their banking relationship with us and we are proud to continue to help advance their financial journeys.

Jeffrey H. Jackson: This latest accolade reinforces the trust and confidence our customers place in their banking relationship with us, and we are proud to continue to help advance their financial goals. I would now like to turn the call over to Dan Weiss, our CFO, for an update on our first quarter financial results and current outlook for 2024. Dan? Thank you.

Jeffrey H. Jackson: I would now like to turn the call over to Dan Weiss, our CFO for an update on our first quarter financial results and current outlook for 2020 for Dan.

Daniel K. Weiss: Thanks, Jeff and good morning, just to highlight a few accomplishments during the first quarter, we achieved strong loan growth of 8% annualized grew.

Daniel K. Weiss: Thanks, Jeff. And good morning.

Daniel K. Weiss: Just to highlight a few accomplishments during the first quarter, we achieved strong loan growth of 8% annualized, grew deposits by 10% annualized, which outpaced loan growth by almost $100 million, and paid down higher-cost wholesale borrowing. We also grew fee revenue and managed expenses down $2.3 million on a linked quarter basis. We were pleased to demonstrate our ability to execute on our strategic initiatives that translated meaningfully into the results for this quarter. For the quarter ending March 31st, 2024, we reported a gap net income available to common shareholders of $33.2 million or $0.56 per share. Net income available to common shareholders excluding after-tax, restructuring, and merger-related expenses was also $33.2 million, or $0.56 per diluted share, as compared to $42.3 million, or $0.71 per diluted share, in the prior year period.

Daniel K. Weiss: <unk> grew deposits, 10% annualized which outpaced loan growth by almost $100 million and paid down higher cost wholesale borrowings. We also grew fee revenue and managed expenses down $2 $3 million on a linked quarter basis, we were pleased to demonstrate our ability to execute on our strategic initiatives that <unk>.

Daniel K. Weiss: <unk> meaningfully into the results for this quarter.

Daniel K. Weiss: For the quarter ending March 31, 2024, we reported GAAP net income available to common shareholders of $33 2 million or 56 per share netting.

Daniel K. Weiss: Net income available to common shareholders, excluding after tax restructuring and merger related expenses was also $33 2 million or 56 cents per diluted share as compared to $42 3 million or 71 cents per diluted share in the prior year period.

Daniel K. Weiss: As of March 31, total assets of $17 8 billion included total portfolio loans of $11 9 billion in securities of $3 3 billion.

Daniel K. Weiss: As of March 31st, total assets of $17.8 billion included total portfolio loans of $11.9 billion and securities of $3.3 billion. Total portfolio loans grew 9% year-over-year and 8% linked quarter annualized, which reflected the strength of our markets, teams, and lending initiatives. We continue to fund loan growth through a combination of deposit growth and regular cash flow from the securities portfolio. We still anticipate the pace of CRE payoffs to pick up as we progress through 2024, as interest rates remain steady and potentially decline.

Daniel K. Weiss: Total portfolio loans grew 9% year over year, and 8% linked quarter annualized which reflected the strength of our markets teams and lending initiatives. We continue to fund loan growth through a combination of deposit growth and regular cash flow from the securities portfolio.

Daniel K. Weiss: We still anticipate the pace of CRE payoffs to pick up as we progress through 2024 as interest rates remained steady and potentially decline.

Daniel K. Weiss: Residential mortgage originations totaled approximately $105 million for the first quarter with roughly 45% of originations sold into the secondary market as compared to $160 million and 28% respectively last year.

Daniel K. Weiss: Residential mortgage originations totaled approximately $105 million for the first quarter, with roughly 45 percent of originations sold into the secondary market, as compared to $160 million and $28, respectively last year. While residential mortgage production has been challenging in this environment, we're encouraged to see pipelines build recently.

Daniel K. Weiss: While residential mortgage production has been challenging in this environment, we're encouraged to see pipelines built recently.

Daniel K. Weiss: As Jeff mentioned, we're pleased with the deposit gathering and retention efforts of our consumer and commercial teams. As these efforts have funded roughly two thirds of our year over year loan growth of more than 100% of sequential quarter loan growth.

Daniel K. Weiss: As Jeff mentioned, we're pleased with the deposit gathering and retention efforts of our consumer and commercial teams. These efforts have funded roughly two-thirds of our year-over-year loan growth and more than 100% of sequential quarter loan growth. As of March 31st, total deposits were $13.5 billion, up 4.8% from the prior year period and up 2.5% from December 31st, 2023, or 10% annually. Consistent with the higher interest rate environment and similar to the industry, we continue to experience some shifts in the mix of our deposits.

Daniel K. Weiss: As of March 31, total deposits were $13 5 billion up four 8% from the prior year period and up two 5% from December 31, 2023 or 10% annualized.

Daniel K. Weiss: Consistent with the higher interest rate environment and similar to the industry. We continued to experience some shift in the mix of our deposits. However, total demand deposits and noninterest bearing deposits as percentages of total deposits remained consistent with the percentage range prior to the pandemic.

Daniel K. Weiss: However, total demand deposits and non-interest-bearing deposits as percentages of total deposits remain consistent with the percentage range prior to the pandemic. Credit quality stability continues. The allowance coverage ratio remained flat from a year ago at 1.09% and declined three basis points from the fourth quarter. Chargots were slightly elevated at 20 basis points, which was mostly related to one CNI relationship.

Daniel K. Weiss: Credit quality.

Daniel K. Weiss: <unk> stability continues the allowance coverage ratio remained flat from a year ago at one point over 9% and declined three basis points from the fourth quarter.

Daniel K. Weiss: Charge offs were slightly elevated at 20 basis points, which was mostly related to one C&I relationship.

Daniel K. Weiss: Qualitative factors within our CECL model improved mainly due to the reduction in office portfolio loan balances resulting from the payoff of two larger office loans during the quarter. The resulting provision for credit losses was $4 million. The first quarter's net interest margin of 2.92% decreased 10 basis points sequentially and 44 basis points year-over-year, primarily due to higher funding costs from increasing deposit costs and associated remix from non-insurance-bearing deposits into higher-tier money market and certificate of deposits.

Daniel K. Weiss: Qualitative factors within our CSO model improved mainly due to the reduction in office portfolio loan balances, resulting from the payoff of two larger office loans during the quarter, the resulting provision for credit losses was $4 million.

Daniel K. Weiss: The first quarter's net interest margin of 292% decreased 10 basis points sequentially, and 44 basis points year over year, primarily due to higher funding costs from increasing deposit costs and associated remix from noninterest bearing deposits into higher tier money market and certificate of deposit accounts.

Daniel K. Weiss: Total deposit funding costs, including non-interest-bearing deposits, for the first quarter of 2024 were 181 basis points, an increase of 20 basis points over the linked quarter. We mostly offset these higher funding costs through the reinvestment of securities into higher yielding loans and the pay down of higher cost FHLB barrings late in the quarter. Non-interest income in the first quarter totaled $30.6 million, a 10.8% increase from the prior year period that was driven by net swap fee and valuation income.

Daniel K. Weiss: Total deposit funding costs, including noninterest bearing deposits for the first quarter of 'twenty 'twenty, four or 181 basis points, an increase of 20 basis points over the linked quarter.

Daniel K. Weiss: We mostly offset these higher funding costs through the reinvestment of securities into higher yielding loans and the pay down of higher cost <unk> borrowings late in the quarter.

Daniel K. Weiss: Noninterest income in the first quarter totaled $36 million.

Daniel K. Weiss: 10, 8% increase from the prior year period that was driven by net swap fee in valuation income.

Daniel K. Weiss: Service charges on deposits and trust fees, all of which are benefiting from organic growth. Trust assets under management increased $600 million over the prior year period to $5.6 billion, resulting in 8% higher trust fees, further reflecting the solid performance of our securities brokerage. We've begun disclosing the quarterly-end values of securities brokerage accounts, including annuities, which totaled $1.8 billion as of March 31st, as compared to $1.6 billion in the prior year period.

Daniel K. Weiss: Service charges on deposits and trust fees, all of which are benefiting from organic growth.

Daniel K. Weiss: Trust assets under management increased $600 million over the prior year period to $5 6 billion, resulting in 8% higher trust fee income.

Daniel K. Weiss: Further reflecting the solid performance of our securities brokerage team, we've begun disclosing the quarter end values of securities brokerage accounts, including annuities, which totaled $1 $8 billion as of March 31, as compared to $1 6 billion in the prior year period.

Daniel K. Weiss: Excluding restructuring and merger related expenses noninterest expense for the three months ended March 31, 2024 totaled $97 2 million down $2.3 million from the linked fourth quarter. The sequential quarter decline resulted from lower quarterly average staffing levels from <unk>.

Daniel K. Weiss: Excluding restructuring and merger-related expenses, non-interest expense for the three months ended March 31, 2024 totaled $97.2 million, down $2.3 million from the length of the fourth quarter. The sequential quarter decline resulted from lower quarterly average staffing levels from efficiency improvements in the mortgage and branch staffing model. Full-time equivalent employees are down 170 from a year ago and down 37 from the fourth quarter.

Daniel K. Weiss: Efficiency improvements in the mortgage and branch staffing models.

Daniel K. Weiss: Equivalent employees are down 170 from a year ago and down 37 from the fourth quarter.

Daniel K. Weiss: Marketing was also down compared to the length of the fourth quarter due to the timing of seasonal marketing camp, but we expect an increase in the second quarter as we kick off our spring marketing initiative. Other operating expense reflects various costs and fees associated with our loan growth, as well as other revenue-generating initiatives across a number of miscellaneous expense categories. Our capital position remains strong, as demonstrated by regulatory ratios that are above the applicable well-capitalized standard.

Daniel K. Weiss: Marketing was also down compared to the linked fourth quarter due to the timing of seasonal marketing campaigns, but we expect an increase in the second quarter as we kick off spring marketing initiatives.

Daniel K. Weiss: Other operating expense reflects various costs and fees associated with our loan growth as well as other revenue generating initiatives across a number of miscellaneous expense categories.

Daniel K. Weiss: Our capital position remains strong as demonstrated by regulatory ratios are above the applicable well capitalized standards.

Daniel K. Weiss: Our Tangible Common Equity to Tangible Assets as of March 31, 2024 was 7.63%, up 19 basis points year-over-year, or 7.05% when including unrealized losses on the health and maturity securities, as shown in Slide 7 of the Supplemental Earnings Presentation. We continue to believe that we're well positioned for any operating environment as we actively manage our liquidity risk to ensure adequate funds to meet changes in loan demand, unexpected outflows of funds and deposits, and other borrowings, as well as take advantage of market opportunities as they arise.

Daniel K. Weiss: Our tangible common equity to tangible assets as of March 31, 2024 was 763% up 19 basis points year over year or 7.05% when including unrealized losses on the held to maturity securities as shown in slide seven of the supplemental earnings presentation.

Daniel K. Weiss: We continue to believe that we're well positioned for any operating environment as we actively manage our liquidity risk to ensure adequate funds to meet changes in loan demand unexpected outflows in deposits and other borrowings as well as take advantage of market opportunities as they arise.

Daniel K. Weiss: Turning to the outlook, in the current operating environment, we expect net interest margin to stabilize in the mid-290s as our assets continue to reprice higher, particularly through loan growth, fixed-rate loan maturities, and securities runoff, while funding costs also move higher from continued deposit mix shift into higher-yielding products, but at a slower pace than what we've experienced over the past year. Trust fees should benefit modestly from organic growth and will be impacted, of course, by the equity and fixed income markets. And as a reminder, first quarter trust fees are seasonally higher due to tax preparation.

Daniel K. Weiss: Turning to the outlook in the current operating environment, we expect net interest margin to stabilize in the mid two ninety's as our assets continue to reprice higher, particularly through loan growth fixed rate loan maturities and securities runoff. While funding costs also move higher from continued deposit mix shift into higher yield.

Daniel K. Weiss: <unk> products.

Daniel K. Weiss: But at a slower pace than what we've experienced over the past year.

Daniel K. Weiss: Trust fees should benefit modestly from organic growth and will be impacted of course by equity and fixed income market trends and as a reminder, first quarter trust fees are seasonally higher due to tax preparation fees.

Daniel K. Weiss: Securities brokerage revenue is expected to remain consistent with the amount generated in the last several quarters but could benefit modestly from organic growth. Digital Banking Income, which is subject to overall consumer spending behaviors, will remain in a similar range to the last few quarters, and service charges on deposits are expected to expand modestly over 2023 from enhanced products and fee-based services. Mortgage banking will continue to be impacted by the overall residential housing market trends but could improve if interest rates begin to move lower and we continue to see pipeline improvement. Our expectation is to sell approximately 50% or more of mortgage originations into the secondary market. Gross commercial swap fee income, excluding market adjustments, is expected to trend similar to 2023 at the $9 million annual rate.

Daniel K. Weiss: <unk> brokerage revenue is expected to remain consistent with the amount generated in the last several quarters, but could benefit modestly from organic growth.

Daniel K. Weiss: Digital banking income, which is subject to overall consumer spending behaviors will remain in a similar range as the last few quarters and service charges on deposit are expected to expand modestly over 2023 from enhanced products and fee based services.

Daniel K. Weiss: Mortgage banking will continue to be impacted by the overall residential housing market trends, but could improve if interest rates begin to move lower and we continue to see pipeline improvement.

Daniel K. Weiss: Our expectation is to sell approximately 50% or more of mortgage originations into the secondary market.

Daniel K. Weiss: Gross commercial swap fee income excluding market adjustments is expected to trend similar to 2023 in the $9 million annual range and.

Daniel K. Weiss: And as Jeff detailed, we're making good progress building the pipeline for our new multi-card and integrated receivables and payables products and continue to expect some modest benefits during the second half of 2024. We remain focused on disciplined expense management and have successfully transformed our financial center network to optimize branch-level staffing by more than 100 retail employees since March of last year. The benefit of these cost savings is reflected in our first quarter run rate; however, we do expect to hire additional revenue producers here during the second quarter.

Daniel K. Weiss: And as Jeff detailed we're making good progress building the pipeline for our new multi cord and integrated receivables and payables products and continue to expect some modest benefit during the second half of 2024.

Daniel K. Weiss: We remain focused on disciplined expense management and have successfully transformed our financial center network to optimize branch level staffing by more than 100 retail employees since March of last year.

Daniel K. Weiss: The benefit of these cost saves are reflected in our first quarter run rate. However, we do expect to hire additional revenue producers here during the second quarter. Therefore, we anticipate salaries and wages to increase some during the second quarter and to also be impacted by midyear merit increases, but mostly impacting the back half of the year.

Daniel K. Weiss: Therefore, we anticipate salaries and wages to increase some during the second quarter and to also be impacted by mid-year merit increases, but mostly impacting the back half. As I mentioned, marketing will increase during the second quarter due to the timing of campaigns. Software and equipment and other expense categories may be up slightly in the second quarter as we implement our strategic plans to improve long-term efficiency and revenue-producing capacity. And based on what we know, we believe our expense run rate during the second quarter of 2024 to be in the $99 million range and then grow modestly due to annual merit increases, higher health care costs, and technology investments during the back half of the year.

Daniel K. Weiss: As I mentioned marketing will increase during the second quarter due to the timing of campaigns software and equipment and other expense categories, maybe up slightly in the second quarter as we implement our strategic plans to improve long term efficiency and revenue producing capacity.

Daniel K. Weiss: And based on what we know we believe our expense run rate during the second quarter of 2024 to be in the $99 million range and then grow modestly due to annual merit increases higher health care costs and technology investments during the back half of the year.

The provision.

Daniel K. Weiss: The provision for credit losses under CECL 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 loans.

Daniel K. Weiss: As for credit losses under Cecil will depend upon changes to the macroeconomic forecast in 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, we currently anticipate our full year effective tax rate.

Operator: And lastly, we currently anticipate our full-year effective tax rate to be between 17.5 and 18.5 percent, subject to changes in tax regulations and taxable income levels. Operator, we are now ready to take questions. Would you please review the instructions?

Daniel K. Weiss: To be between 17, and a half and 18, 5% subject to changes in tax regulations in taxable income levels.

Speaker Change: Operator, we're now ready to take questions would you. Please review the instructions.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

Daniel Tamayo: If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. Please limit yourselves to one question and one follow-up, and then you can return to the queue. At this time, we will pause momentarily to assemble our roster. The first question comes from Daniel Tamayo, with Raymond James. Please go ahead.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two please.

Speaker Change: Please limit yourselves to one question and one follow up and then you can return to the queue.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: The first question comes from Daniel Tamayo with Raymond James. Please go ahead.

Daniel Tamayo: Hey, good morning guys. Thanks for taking my question. I think we should start first on just the deposit side. Just curious how you're thinking about it.

Daniel Tamayo: Hey, good morning, guys. Thanks for taking my question.

Daniel Tamayo:

Daniel Tamayo: Maybe let me start first on just the the deposit side, just curious how you're thinking about them.

Jeffrey H. Jackson: Yeah, good morning, Dan. When we look at deposit growth, as you may recall, we really put a big push in starting in the third quarter last year. We added incentives for our commercial bankers, and we came out with some campaigns. So we've seen some nice growth in the third quarter, fourth quarter, and now this previous quarter related to deposit growth. We also rolled out a new consumer checking account, WesBanco1, that we've seen tremendous demand for.

Daniel Tamayo: Growth as it relates to obviously deposits, but then how how the loan deposit ratio may shake out going forward as well.

Speaker Change: Yeah, Good morning, Dan.

Speaker Change: You know when we look at deposit growth as you may recall, we really put a big push starting in third quarter last year, we added incentives for our commercial bankers and we came out with some campaigns. So we've seen some nice growth third quarter fourth quarter and now this previous quarter.

Speaker Change: Related to the deposit growth.

Speaker Change: We also rolled out a new consumer checking account West bank of one account that we've seen tremendous demand for and so we continue these camp.

Jeffrey H. Jackson: And so we continue these campaigns going forward, and we feel like we're still going to see some pretty nice growth. The other piece of it, in relation to non-interest bearing, obviously, we saw a very limited decline in our non-interest bearing balances in the first quarter. I think they declined by about 20 million, so basically, almost flat there. And we've put a nice focus as well on non-interest bearing deposits. So when I look at the loan to deposit ratio, I would expect us to continue to remain in that high 80s realm because I do believe we're going to have a pretty strong year in loan growth as well, as we look at kind of mid to upper single-digit loan growth also.

Speaker Change: Campaigns going forward and we feel like we're still going to see some pretty nice growth are the other piece of it.

Speaker Change: In relation to our noninterest bearing obviously, we saw a very limited decline in our non interest bearing balances in first quarter I think they declined about 20 million. So basically almost flat there and we've put a nice focus as well on noninterest bearing deposits. So when I look at the loan to deposit ratio I would.

Speaker Change: <unk> that continue to remain in that high Eighty's realm.

Speaker Change: I do believe we're going to have a pretty strong year in loan growth as well as we look at kind of mid to upper single digit loan growth also.

Speaker Change: Okay terrific thanks for that color.

Daniel K. Weiss: Okay, terrific. Thanks for that, Keller. And, I guess, switching to the margin here. Did I hear correctly that you said the margin is going to stabilize in the mid to late night?

Speaker Change: And I guess on the <unk>.

Speaker Change: Wishing to the margin here did I hear correctly that you said the margin is going to stabilize in the mid two ninety's.

Daniel K. Weiss: Yeah, that's correct. That's correct. So you're expecting... Sorry, go ahead. Yes, we're expecting it to increase going throughout the rest of the year.

Speaker Change: Dan.

Daniel K. Weiss: Yeah, that's correct.

Speaker Change: That's correct.

Speaker Change: Oh, so you're expecting sorry go ahead.

Speaker Change: Yes, where we're expecting it to increase going throughout the rest of the year.

Speaker Change: Okay, and any so theres no I.

Daniel Tamayo: Okay, any, uh, so there's no... I mean, kind of immediately, starting in the second quarter, you think that you'll see a snapback of the margin and then kind of a slow build off of that number and stabilizing in the mid-290s. And that's assuming what, in terms of non-interest-bearing concentration?

Speaker Change: I mean that you're kind of immediately is it starting in the second quarter, you think that you'll you'll see a snapback of the of the margin and then kind of a slow.

Speaker Change: Slow build off of that number and stabilizing mid mid two ninety's and that's and that's assuming what in terms of of noninterest bearing concentration.

Daniel K. Weiss: Yeah, Danny, as I said, the prepared commentary, mid-290s, that's where we think we'll stabilize here over the next kind of three quarters. In terms of non-interest bearing, included in that kind of modeling would be, you know, despite the fact that we only saw about, as Jeff said, $20, $23 million in runoff and non-interest bearing, we are projecting or modeling at least between 50 and 75 million of remix into interest bearing within that guidance. So, you know, we get down to, you know, from 29% of total deposits down to, you know, call it that, you know, 27%.

Speaker Change: Yeah, Danny so.

Danny: As I said in the prepared commentary mid two Ninety's, that's where we think it will stabilize here over the next kind of three quarters.

Danny: In terms of noninterest bearing.

Danny: Included in that kind of modeling would be.

Despite the fact that we only saw about play as Jeff said 20 $23 million in it run off in noninterest bearing we are projecting our modeling at least between.

Danny: Between 50, and $75 million of remix into interest bearing within that within that guidance.

Danny: So we get that we get down to from 29% of total deposits down to you know call. It in that 27.

Danny: That range.

Speaker Change: Okay, Great Alright.

Daniel Tamayo: Okay, great. All right. All right, I'll step back. Thanks for the answers, guys. Thank you. The next question...

Speaker Change: Alright, I'll step back thanks for the answers guys. Thank you.

Speaker Change: The next question comes from Mark <unk>.

Mark Shutley: The next question comes from Mark Shutley with KBW. Please go ahead.

Mark: With G K B W. Please go ahead.

Mark: Hey, good morning.

Mark Shutley: Um, just to follow up on the margin discussion, I was wondering at what level we should expect those money market and interest-bearing deposit costs to peak at before we start to see some rate cuts.

Good morning, good morning.

Mark: Just to follow up on the margin discussion I was wondering you know what.

Mark: What level, we should expect those money market and interest bearing deposit costs to peak at.

Before we start to see some rate cuts.

Sure. So what I would tell you is that we generally speaking until we see rate cuts at least in and right now we've run kind of a couple of different scenarios.

Daniel K. Weiss: Sure. So, what I would tell you is that, generally speaking, until we see rate cuts, at least, and right now, we've run kind of a couple different scenarios, you know, one with as many as three cuts, one with, you know, as few as zero cuts. But what I would tell you is that until we see a rate cut, for there to be some continued increase, but at a slower rate than what we've seen on both money markets and the, you know, the interest-bearing deposits. We're seeing maybe seven basis points of increase, you know, per month.

Mark: One with as many as three cuts one with his.

Mark: His view is zero cuts.

Mark: But what I would tell you is that we expect until we see rate cut for there to be some continued increase but at a slower rate than what we've seen on both money markets and the interest bearing deposits.

Mark: Now, we're seeing maybe seven basis points of.

Mark: Increase per month, and we would expect that though to slow here as we continue out throughout the quarter as most of the back book at this point has really repriced, what we're thinking.

Daniel K. Weiss: And we would expect, you know, that though growth will slow here as we continue out throughout the quarter, as most of the back book at this point has really repriced what we're thinking, you know, what we're seeing is this would be to the extent that we're adding any additional growth in terms of money market and interest-bearing deposits. Yeah, the other thing...

Speaker Change: Yeah, what we're seeing is this would be to the extent that we're adding any additional.

Speaker Change: Growth in terms of money market and interest bearing deposit.

Speaker Change: Yeah. The other thing I would just add quickly obviously, if we continue to grow deposits faster than loans, we will continue to pay down our <unk> borrowings, which are currently at five 5%. So we're definitely not bringing in new deposits anywhere near that rate and expect to obviously get some benefit to that if we continue to grow.

Daniel K. Weiss: Yeah, the other thing I would just add quickly, obviously, if we continue to grow deposits faster than loans, we'll continue to pay down our FHLB borrowings, which are currently at 5.5%. So we're definitely not bringing in new deposits anywhere near that rate and expect to obviously get some benefit from that if we continue to grow deposits faster than loans.

Speaker Change: Deposits faster than loans.

Speaker Change: Yeah.

Speaker Change: Maybe just to add on to that even further with that $250 million in FHL fee borrowings that we paid down that was as Jeff mentioned 555, 6%.

Daniel K. Weiss: Maybe just to add to that even further, with that $250 million in FHLB borings that we paid down, that was, as Jeff mentioned, 5.5%, 5.6%. The new deposits that we brought on, the $330 million, call it, that came on, came on at a weighted average rate of right around 360. And a lot of that deposit growth actually occurred in the back half of the first quarter. So we haven't yet, we're not, we're going to see a benefit here into the second quarter and beyond to the extent we can maintain those deposit balances just because we're picking up, you know, we're saving 200 basis points, you know, on the alternative being FHLB borings.

The new the deposits that we brought on the 330 million call. It that came on came on at a weighted average rate of right around $3 60.

Speaker Change: So and a lot of that deposit growth actually occurred in the back half of the first quarter. So we haven't yet we're not we're going to see a benefit here into the second quarter and beyond to the extent, we can maintain those deposit balances just because we're picking up.

Savings 200 basis points.

Speaker Change: On the alternative being <unk>.

Speaker Change: Yeah, that's super helpful.

Mark Shutley: Yeah, that's super helpful. And maybe just switching gears here for one more. So you mentioned the $1.2 billion pipeline and how, you know, a good chunk of that is LPOs. And I was wondering if you could give any additional color on maybe the loan type mix in there and sort of what we should be expecting for 2024 as far as CRE and CNI growth are concerned.

Speaker Change: And maybe just switching gears here for one more so.

Speaker Change: You mentioned, the $1 $2 billion pipeline and how you know a good chunk of that is <unk> and I was wondering if you could give any additional color on maybe the loan type mix in there and sort of.

Speaker Change: You know what.

Speaker Change: We should be expecting for 2024 as far as heat.

Speaker Change: Already in C&I growth.

Speaker Change: Sure.

Jeffrey H. Jackson: Sure, you know we're striving, and as I've mentioned before, to get a 50-50 mix kind of going forward. What I would say on the pipeline currently is around 60% CRE, 40% CNI. But we're striving for 50-50 production, but I would say probably it'll end up by the end of the year being a little more heavily weighted on the CRE.

Speaker Change: We're striving and as I've mentioned before to get a 50 50 mix kind of going forward.

Speaker Change: What I would say on the pipeline currently I'm going to guess, it's around 60% CRE and 40% C&I.

Speaker Change: But we're striving for 50 50 production.

Speaker Change: But I would say probably it will end up by the end of the year being a little more heavily weighted on the CRE.

Speaker Change: Awesome, Thanks for taking my questions. Thank.

Mark Shutley: Awesome. Thanks for taking my questions.

Speaker Change: Thank you.

Speaker Change: The next question comes from Russell Gunther with Stephens. Please go ahead.

Russell Elliott Teasdale Gunther: The next question comes from Russell Gunther with Stevens. Please go ahead.

Russell Elliott Teasdale Gunther: Hey, good morning, guys.

Russell Elliott Teasdale Gunther: Hey, good morning guys. I wanted to just start following up on the margin discussion. If you guys could just share what your assumptions are for the Fed Funds Outlook within the kind of mid-290s guide. And Dan, maybe just help quantify what that fixed repricing opportunity is on the asset side this year. And lastly, when we get cuts, if we get cuts, what that could mean for the WesBanco margin.

Russell Elliott Teasdale Gunther: I wanted to just start following up on the margin discussion. If you guys could you share what your assumptions are for the fed funds outlook within the kind of mid 290, <unk> Guide and Dan maybe just help quantify what that fixed repricing opportunity is on the asset side this year.

Russell Elliott Teasdale Gunther: And lastly, just when we get cut if we get cuts what that could mean for the west bank of larger.

Daniel K. Weiss: Yeah, Russell, So I would say, we've modeled as I said kind of with three cuts we've modeled with zero cuts.

Daniel K. Weiss: Yeah, Russell, so I would say, as I said, kind of with three cuts; we've modeled with zero cuts. And, and interestingly, it's not as significant of a difference as you might expect. So if we, you know, the guidance that we provided last quarter, we assumed the June cut, a September and a December cut. And, of course, December doesn't really impact the 24 at all.

Daniel K. Weiss: And interestingly.

Daniel K. Weiss: It's not as significant of a difference as you might expect so if we the guidance that we provided.

Daniel K. Weiss: Last quarter, we assume that June cut our September and December cut and of course December doesn't really impact the 'twenty four it all September is very pretty minimal as well just because by the time that it takes effect and it runs through the run through the the loans and the deposits.

Daniel K. Weiss: September is pretty minimal as well, just because by the time the cut takes effect, and we run through this run through the loans and the deposits, there's really not much of an effect there. It's really the June cut that has some impact on the number on the margin. And it's actually doesn't you don't And zero cuts is about two to three basis points of margin improvement or decline, depending on how you look at it, in the fourth quarter.

Daniel K. Weiss: There's really not much of an effect there it's really the June cut that.

Daniel K. Weiss: It has some impact on their on the on the margin and its actually it doesn't you don't see that until the fourth quarter. So the difference for us between three cuts and zero cuts is about two to three basis points of margin.

Daniel K. Weiss: Improvement or decline depending on how you know how you look at it.

Daniel K. Weiss: In the fourth quarter. So we're.

Daniel K. Weiss: So working off of that mid-290s, we would say... We would still be pretty much in line with that bid 290s, whether there are three cuts or whether there are zero cuts. To answer the second part of your question, If we think about the assets, that would be, you know, that would be repricing. We've got, obviously, securities, which we talked about, $100 million roughly per quarter that are, you know, those cash flows are kicking off, and we're reinvesting, you know, 2.5% yield into 8% call it yield in terms of funding loan growth.

Daniel K. Weiss: And off of that mid to nineties.

Speaker Change: We would say.

Speaker Change: We would still be pretty pretty much in line with that mid 290 is whether there are three cuts or whether there are zero cuts.

Speaker Change: To answer the second part of your question.

Speaker Change: If we think about the assets that would be.

Speaker Change: That would be.

Speaker Change: That would be repricing, we've got obviously securities, which you've talked about $100 million roughly per quarter that are.

Speaker Change: Those cash flows are kicking off and we're reinvesting you know two 5% yield in the 8% call. It yield in terms of funding loan growth.

Daniel K. Weiss: We've got fixed rate loan maturities over the next 12 months of about 10% of our fixed rate book, which is roughly $250 million. And so that's currently priced at about $4.60, so think about 4.6% increasing to somewhere in the high sevens or low eights. And then we've also got adjustable rate loans, about $300 million in adjustable rates. That's part of our available rate loan balances, but they, you know, they adjust anywhere from, you know, six months up to five years.

We've got fixed rate loan maturities over the next 12 months of about 10% of our fixed rate book, which is roughly 250 $250 million.

Speaker Change: And so that's.

Speaker Change: Currently price at about $4 60.

Speaker Change: So think about.

Speaker Change: Four 6% increasing to somewhere in the high Sevens low eights.

Speaker Change: And then we've also got adjustable rate loans about $300 million of adjustable rates there that part of our variable rate loan balances, but they you know they just anywhere from.

Speaker Change: You know six months up to a five year or so you've got 300 million there with a weighted average rate of about 5.25% there would also.

Daniel K. Weiss: We've got $300 million there with a weighted average rate of about five and a quarter percent that would also, you know, reprice over the next 12 months. So I think... From an asset standpoint, that's what I would expect the fixed rate assets to be repricing upward. And I think the third part of your question, I think I answered earlier.

Reprice over the next.

Speaker Change: The next 12 months, so I think from.

Speaker Change: From an asset standpoint, that's what I would expect the fixed rate assets.

Speaker Change: Repricing upward.

Speaker Change: And I think your third part of your question I think I answered an earlier.

Speaker Change: You did.

Speaker Change: Correct.

Russell Elliott Teasdale Gunther: You did it! I'm impressed. That's my way of trying to sneak in one more which is on the expense side. I appreciate your guys' guidance and commentary for the near term. Jeff, you kind of teased the potential for some efficiencies in the back half, and while we'll wait for that announcement, just given the steps you've already taken, could you address kind of potentially where you'd expect to get those, whether that could include branch rationalization, which we haven't seen in some time, and then, you know, does this... relate results in a step-down in expenses, or does this kind of help keep the Thank you.

Speaker Change: That's my way of trying to sneak in one more which is on the expense side I. Appreciate your guys' guidance and commentary for the near term, Jeff you kind of.

Speaker Change: <unk>.

Speaker Change: The potential for some efficiencies in the back half and well wait for that announcement, just given the steps you've already taken could you address kind of potentially where you would expect to get those whether that could include.

Speaker Change: Branch rationalization.

Speaker Change: Which we haven't seen in some time and then.

Speaker Change: Does this.

Speaker Change: Relate result in a step down in expenses or does this kind of help keep.

Speaker Change: The growth engine going while keeping the bottom line pretty tight.

Speaker Change: Thank you guys.

Jeffrey H. Jackson: Yeah, thanks, Russell. No, I think, as you mentioned before, branch optimization. We're always looking at that. You know, last year we did a couple branches, but we're definitely looking at that for potentially something we would potentially take action on this year. There are some other things we're looking at as well in some of our operational functions for some cost savings. And then the one other thing we've kind of mentioned in the past is, You know, printing statements. We basically printed and mailed customer statements, business and customer statements for free. We have changed the business to where now they get them electronically.

Yes, Thanks, Russell No I think as you mentioned before our branch optimization, we are always looking at that.

Speaker Change: You know last year, we did a couple of branches, but we're definitely looking at that for potentially something we would potentially take action on this year are there. Some other things we're looking at as well on some of our operational functions for some cost saves and then the one other thing we.

Speaker Change: You kind of mentioned in the past is.

Speaker Change: <unk> printing.

Speaker Change: Statements.

Speaker Change: We basically printed and mailed customer statements business and customer statements for free.

Speaker Change: We have.

Speaker Change: Change the business to where now they they get them electronically that's saving us anywhere from 70 to $100000 a month.

Jeffrey H. Jackson: That's saving us anywhere from $70,000 to $100,000 a month. And then we're also looking at that on the consumer side as well, planning to roll something out in May, once again, which I think should be a nice cost-saving force as well. Those are just some of the things we're looking at. We have a few other things that we're obviously taking a look at, but... Yeah, we've got a few cost-save initiatives we're working on.

Speaker Change: And then we're also looking at that on the consumer side as well are planning to roll something out in may.

Speaker Change: Once again.

Speaker Change: Which I think should be a nice cost say for us as well.

Speaker Change: Those are just some of the things we're looking at we have a few other things that we're we're obviously, taking a look at but.

Speaker Change: Yes, we've got a few few cost save initiatives, we're working on.

Speaker Change: I appreciate it thank you guys.

Jeffrey H. Jackson: I appreciate it, Jeff. Thank you, guys. The next question comes from

Speaker Change: The next question comes from Casey Whitman with Piper Sandler. Please go ahead.

Casey Cassiday Orr Whitman: The next question comes from Casey Whitman with Piper Sandler. Please go ahead.

Casey Cassiday Orr Whitman: Hey, good morning.

Casey Cassiday Orr Whitman: Can you address how you are currently stacking just your capital priorities? You know, what are your thoughts on potentially buying back shares this year? And then remind us what you might look for in an M&A partner. Is there any update there from, you know, what you've discussed previously with us? Sure.

Casey Cassiday Orr Whitman: Good morning, Casey good morning.

Casey Cassiday Orr Whitman: Can you address how you are currently stacking just your capital priorities what are your thoughts on potentially buying back shares. This year and then remind US you know what you might look for in an M&A partner is there any update there from what you've discussed previously with us.

Speaker Change: Sure sure. So just starting with our basically capital management strategy, obviously, our number one we're committed to the dividend we.

Jeffrey H. Jackson: Sure, so just starting with our capital management strategy, obviously our number one, we're committed to the dividend. We feel like shareholders really appreciate the dividend, and we're very committed to that.

Speaker Change: We feel like shareholders really appreciate the dividend, we're very committed to that second is funding loan growth as I mentioned before we're looking at mid to upper single digit loan growth and.

Jeffrey H. Jackson: Second, funding loan growth. As I mentioned before, we're looking at mid to upper single-digit loan growth. And as the securities roll off, about $100 million a quarter, we use that to fund loan growth. Although with our deposit growth as well, we benefited from being able to pay down FHLV borrowings with some of that.

Speaker Change: You know as the securities roll off about $100 million a quarter, we use that to fund loan growth, although with our deposit growth as well, we benefited from being able to pay down <unk> borrowings.

Speaker Change: With some of that and then third would be M&A, and then fourth would be buybacks.

Jeffrey H. Jackson: Then third would be M&A, and then fourth would be buybacks. I would say, as it relates to your M&A question, nothing's really changed. We're always going to be very optimistic if the right deal comes along at the right price and meets all our return hurdles. We are still looking in Tennessee, Virginia, and then potentially filling in Ohio. Nothing has changed there, and I don't feel very optimistic about this year as it relates to M&A, but I have nothing to announce at this point.

Speaker Change: I would say as it relates to your M&A question, nothing has really changed where we're always going to be very optimistic if the opportunistic I should say if the right deal comes along at the right price and meets all our return hurdles.

Speaker Change: Looking at Tennessee, Virginia, and then potentially filling in Ohio.

Speaker Change: Nothing has changed there.

Speaker Change: Obviously, I feel very optimistic about this year as it relates to M&A, but nothing to announce at this point.

Speaker Change: And just a follow on for that would be can you remind us the size range and the target that you might be interested in.

Casey Cassiday Orr Whitman: Alright, just a follow-on question for that would be, can you remind us the size range and the target that you might be interested in? Yes.

Jeffrey H. Jackson: Yes, the typical target we look at is about $2 to $5 billion in assets. Not to say we wouldn't look a little bit bigger or a little bit smaller, but I would target $2 to $5 billion in assets.

Speaker Change: Yes, our typical target we look at is about $2 billion to $5 billion in assets not to say, we wouldn't look a little bit bigger a little bit smaller, but I would target $2 billion to $5 billion in assets.

Speaker Change: Okay.

Casey Cassiday Orr Whitman: Okay, I'll sneak just one more in there. I think you mentioned some larger office loans paying off during the quarter. Can you just quantify those numbers and maybe remind us just the size of the non-under-occupied office book? I recall it's relatively small, but can you confirm that for us?

Speaker Change: Just one more in there I think you mentioned some larger office loans paying off during the quarter can you just quantify those numbers, then and maybe remind us just the size of the non owner occupied office book their call. It's relatively small, but can you confirm that for us.

Speaker Change: Yeah, so our non owner occupied represents about 3% of total loans.

Daniel K. Weiss: Yeah, so non-occupied represents about 3% of total loans. So, relatively small to begin with, and nearly, I think, 98% is pass rated. The two loans that paid off, I believe, oh gosh, I think, One was in the Louisville area, the other was in north central West Virginia, and I believe they totaled about $20 million.

Speaker Change: So relatively small to begin with and nearly I think 98% is pass rated.

Speaker Change: The the two loans that paid off I believe.

Speaker Change: Oh Gosh I think.

Speaker Change: One was.

Speaker Change: The Louisville area. The other was a north central West Virginia.

Speaker Change: And I believe they totaled about $20 million.

Yes that did have an impact to the provision the other thing I would add just to give you a full sizing we.

Daniel K. Weiss: Yeah, and that did have an impact on the provision. The other thing I would add, just to give you a full size, we have about 300 loans totaling about $425 million, which gives you an average loan size of $1.4 million in our office portfolio. Yeah, so when I say look, when I say larger,

We have about 300 million 300 loans totaling about $425 million, which gives you an average loan size of $1 4 million in our office portfolio.

Speaker Change: Yeah, So when I say look when I say larger loans totaling.

Speaker Change: Totaling $20 million, given our relative average sizes.

Daniel K. Weiss: Yeah, so when I say larger loans, totaling $20 million, given our relative average size is $1.4 million, they're larger for our oil.

Speaker Change: A million for their larger floor for our oil.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Manuel Antonio Navas: The next question comes from Manuel Navas, with D. A. Davidson.

Speaker Change: The next question comes from Manuel Novice with D. A Davidson. Please go ahead.

Manuel Antonio Navas: How should I think about the strong start of the year versus the mid-single digits to high single digits loan guide? Could you kind of get to the high end, or are you also talking about some CRE payoffs rising? Just kind of let me know what you think about that range.

Manuel Antonio Navas: How should I think about the strong started the year versus the mid single digit to high single digits loan guide could you kind of get to the high end or.

Manuel Antonio Navas: You kind of also talking about some CRE payoffs rising just kind of let me know how you think about that range.

Jeffrey H. Jackson: Sure, good morning Manuel. No, we definitely think there's a possibility we could get to the high end for sure. I mean, you never know what the year brings, but as we stated before, our pipelines are basically at all-time highs, around 1.2 billion. So I definitely think that is definitely in reach.

Speaker Change: Sure Good morning Manuel.

Speaker Change: We definitely think there is a possibility we could get to the high end for sure.

Speaker Change: I mean, you never know what the year brings but as we stated before I mean, our pipelines are basically at all time highs around $1 2 billion.

Speaker Change:

Speaker Change: So I definitely think that is definitely in reach.

Speaker Change: And you talked about potential for more talent I think talking to any index.

Manuel Antonio Navas: And you talked about the potential for more talent; I think talking in the expense guide, where are you kind of targeting some of that talent on the lending side? Any new regions, just adding to current regions, just any more color, that would be great. Sure. I think we're looking at both.

Speaker Change: In the expense guide.

Speaker Change: Where you're kind of targeting some of that talent on the lending side any new regions, just adding to current regions just any more color there would be great.

Speaker Change: Sure I think we're looking at both so we've had very good success with our Lps I know, we have looked in Knoxville and Nashville.

Jeffrey H. Jackson: I think we're looking at both. And so far, we've had very good success with our LPOs. I know we've looked in Knoxville and Nashville, continuing to add in Cleveland, Chattanooga, Indianapolis, and then we're also looking at various parts of Virginia as potential openings for LPOs as well. But then, if you look at our existing markets, we're always out looking and talking to new talent that could potentially be additive to our company.

Speaker Change: <unk> to add in Cleveland Chattanooga Indianapolis.

Speaker Change: We're also looking at various parts of Virginia.

Speaker Change: Potential openings of L. P OS as well, but then.

Speaker Change: If you look at our existing markets, we're always out looking and talking to new talent that could potentially be additive to our company.

Speaker Change: Yeah.

Speaker Change: I appreciate that.

Manuel Antonio Navas: I appreciate that. How much of the deposit growth has come in from commercial lenders? Do you have that type of specific data? I know that 34% of total deposits are from businesses, but how much of the new deposit growth is coming from commercial lenders? It's about...

Speaker Change: How much of the.

Speaker Change: How much of the deposit growth has come in from commercial commercial lenders do you have that that type of a specific.

Speaker Change: Data I know that 34%, 34% of total deposits our business, but how much of the new deposit growth is coming from the commercial lenders.

Speaker Change: It's about 50%.

Jeffrey H. Jackson: Okay. Yeah. And as I mentioned before, we really hadn't incented them until the third quarter last year to bring in deposits. And now we're kind of seeing the fruits of that labor in the last three quarters.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: As I mentioned before we really had not intended them until third quarter last year to bring in deposits and now we're kind of seeing the fruits of that labor in the last three quarters.

Manuel Antonio Navas: Thank you. Thank you. I'll step back into the queue.

Speaker Change: Thank you. Thank you I'll step back into the queue.

Speaker Change: The next question comes from Karl Shepherd with RBC capital markets. Please go ahead.

Karl Robert Shepard: The next question comes from Karl Shepard with RBC Capital Markets. Please go ahead.

Karl Robert Shepard: Hey, good morning, guys.

Karl Robert Shepard: Hey, good morning, guys, Hey, good morning, Carl Good morning.

Karl Robert Shepard: Hey, good morning Karl. Good morning.

Karl Robert Shepard: I wanted to pick up on Casey's question on M&A.

Karl Robert Shepard: I wanted to pick up on Casey's question on M&A. I think he said optimistic or getting something done.

Karl Robert Shepard: You said optimistic I'm getting something done can you just touch on the environment changed at all or are you getting more or less.

Jeffrey H. Jackson: Can you just touch on, has the environment changed at all? Are you getting more looks at things? Are sellers starting to raise their hands? Can you just walk us through that? Yeah.

Our stellar starting to raise their hands can you just walk us through that.

Karl Robert Shepard: Yes.

Jeffrey H. Jackson: Yes, I would. I would say, the reason I'm optimistic is I do believe we're starting to see more opportunities. I do think that, You know, with this potentially hire for longer that may have triggered some some boards and CEOs rethink potentially is now a time to sell and partner up with a great bank like us. So, I do believe the environment has changed, obviously, the math has not really gotten any easier, but, you know, I think there has been a mindset, once again, I think a lot of that's interest rate driven, where, you know, potentially, six months ago, we might have seen, three, six months ago, we might have seen banks that were on the fence on selling thinking, all right, I've been through the worst of it, I think we're going to get, With a higher loan to deposit ratio and thinking of how difficult it might be over the next several years versus partnering up, I think maybe boards have started to become more open to partnering up with someone like ourselves.

I would say the reason I'm optimistic as I do believe we're starting to see more opportunities.

Karl Robert Shepard: I do think that.

Karl Robert Shepard: You know with this potentially higher for longer that may have triggered some some boards and.

Karl Robert Shepard: To think rethink potentially is now a time to sell and partner up with a great bank like us.

Karl Robert Shepard: So I do believe the environment has changed obviously.

Karl Robert Shepard: The math is not really gotten any easier, but you know I think there is they've been a mindset. Once again I think a lot of that is interest rate driven where you know potentially six months ago, we might have seen 336 months ago, we might have seen.

Karl Robert Shepard: Things that were on the fence on selling thinking alright, I've been through the worst of it.

Karl Robert Shepard: I think we're going to get some rate cuts and that's going to help me to now I think more uncertainty if.

Karl Robert Shepard: If you are setting you know.

With a higher loan to deposit ratio and thinking of how difficult it might be over the next several years versus partnering up.

Karl Robert Shepard: I think maybe boards have started become more open to partnering up with someone like ourselves.

Karl Robert Shepard: Okay.

Karl Robert Shepard: And then kind of pivoting here, I wanted to follow up on some of the loan growth commentary and the paydowns in CRE as it relates to new offices and new lenders. Do you think kind of the higher rate environments kept a lid on what might be available for business from some of these new offices and if that starts to thaw, does that take a lid off of kind of what's possible, or is that not really how it impacted New York Contributions? I think higher rates have definitely had an impact on...

Speaker Change: And then kind of pivoting here.

Speaker Change: To follow up on small loan growth commentary.

Speaker Change: The paydowns in CRE.

Speaker Change: As it relates to new.

Speaker Change: Opposite the new lenders do you think kind of a higher rate environment kept a lid on what might be available for business from some of these new offices in is that the thought is that takeaway it off with kind of what's possible or is that not really had an impact on some of the newer.

Speaker Change: Contribution.

Speaker Change: I think higher rates are definitely had an impact on some projects.

Jeffrey H. Jackson: I think higher rates have definitely had an impact on some projects overall in the CRE space, but as it relates to office, I think they're just based on what we went through with COVID and the work at home movement and different things going on in that environment. I just think potentially there's just so much office space available today that if you're a developer, you're looking to put money in some other different type of property, whether that's a retail development, multifamily, or some other type, so I think part of it is that availability of office space today is kind of keeping a lid on some of that, and I think it's also opportunity and what's better for a developer to invest But outside of office, like I mentioned before, I think higher interest rates have slowed and stopped some projects, but we still see a nice, healthy flow, depending on which market we look at.

Speaker Change: Overall in the CRE space, but as it relates to office.

Speaker Change: I think they're just based on what we went through with Covid and the work at home movement and different things going on in that environment. I, just think potentially there's just so much office space online available today that if you are a developer you are looking to put money in some other different type of property, where that's a retail development.

Speaker Change: Multifamily.

Speaker Change: Or some other type so I think part of it is oh.

Speaker Change: Availability today in the office space is kind of keeping a lid on some of that and I think it's also opportunity and what's better for a developer to put invest and put their money into them.

Speaker Change: But outside of office like I mentioned before I think higher interest rates have slowed and stopped some projects, but we still see a nice healthy flow depends.

Speaker Change: Depending on which market we look at.

Speaker Change: Thanks for the help.

David Jason Bishop: The next question comes from Dave Bishop with the Hovde Group. Please go ahead.

Speaker Change: Thank you.

Speaker Change: The next question comes from Dave Bishop with hub Degroup. Please go ahead.

David Jason Bishop: and the company gentlemen. Hey, good morning Dave. Good morning Dave.

David Jason Bishop: Yeah. Good morning, gentlemen, Hey, good morning, Dave Good morning, Dave.

Jeffrey H. Jackson: Hey Jeff, maybe most of my questions have been asked and answered, but maybe a little color on the uptick in classified loans, I think it was up 35% on the dollar basis. Maybe what you're seeing in terms of the underlying trends in credit quality? Yeah.

David Jason Bishop: Hey, Jeff maybe that looks like.

David Jason Bishop: Questions asked and answered, but maybe a little color on the uptick in classified loans only was up 35% on a dollar basis, maybe what youre seeing in terms of the underlying trends in credit quality.

David Jason Bishop: Yes.

Jeffrey H. Jackson: Yes, so the uptick, and as you know, we've had incredibly low CNC ratios for the last several years. That uptick really relates to one C&I credit that really increased our percentage for the first quarter. We do believe that that should be worked out and restructured by the end of the second quarter. So we do believe that that is a blip, but it's really basically one C&I credit that we feel like should be resolved by the end of this quarter.

Jeffrey H. Jackson: Yes, so the uptick and as as you know we've had over the last several years are incredibly low CNC ratios.

Jeffrey H. Jackson: That uptick really relates to one C&I credit.

Jeffrey H. Jackson: That really increased our percentage for first quarter, we do believe that should be worked out in and restructured by the end of second quarter. So we do believe that that is a blip, it's really basically one C&I credit that we feel like it.

Jeffrey H. Jackson: It should be.

Jeffrey H. Jackson: Resolved by the end of this quarter I'd say overall, though when we look at the credit quality.

Jeffrey H. Jackson: I'd say overall, though, when we look at credit quality, we have one-offs here and there, but no systemic issues. We're not seeing anything that's changed over the last several quarters, and we feel very good about where our credit quality stands today.

Jeffrey H. Jackson: We have one offs here and there, but no systemic issues, we're not seeing anything that.

Jeffrey H. Jackson: That changed over the last several quarters and feel very good about where our credit quality stands today.

Speaker Change: Great and then maybe a follow up.

David Jason Bishop: Great. And then maybe a follow-up, but somewhat to the margin, but, you know, you guys have been doing a good job, expanding on the commercial side, the pipelines up, low in yield, as you mentioned, or, you know, high 78%. In terms of, you know, reconciling that with the ZIM guidance, you know, where should we think about low yields and average earning asset yields trending over the near term? Thanks. Yeah, loan yields are.

Speaker Change: Somewhat to the margin, but you guys have been doing a good job.

Speaker Change: Expanding on the commercial side the pipeline is up.

Speaker Change: Loan yields you guys, you mentioned or high 7% to 8% in terms of reconciling that with the NIM guidance.

Where should we think about loan yields and average earning asset yields trending over the near term. Thanks.

Speaker Change: Yes loan yields I would expect.

Daniel K. Weiss: Yeah, loan yields, I would expect to continue where they've been, for the most part, absent rate cuts, which is, you know, generally speaking, has an eight handle on it. You can see in the slide deck that we report a weighted average loan yield of 7.96%. I'd just point out that that is not tax-equivalent. You would have to add about 10 basis points onto that to get to a tax-equivalent rate.

Speaker Change: To continue where.

Speaker Change: Where they where they've been for the most part absent rate cuts which is.

Speaker Change: No.

Speaker Change: Generally speaking has an eight handle on it.

Speaker Change: You can see in the slide deck, we report.

Speaker Change: Weighted average.

Speaker Change: Loan yield of 796% I'd, just point out but that is not tax equivalent.

Speaker Change: Have to add about 10 basis points onto that to get to a tax equivalent rate.

Daniel K. Weiss: So, yeah, we would expect to continue to see upward momentum on, you know, average earning assets—or, I'm sorry, weighted average yields on earning assets, mainly due to that continued improvement. And as I said earlier, to answer Russell's question, we do have a number of, you know, fixed-rate maturities, adjustable rates, et cetera, and we're continuing, as I said, to use cash So we certainly expect those yields on earning assets to continue to increase.

Speaker Change: So yeah, we would expect to continue to see upward momentum on.

Speaker Change: Average, earning assets are I'm, sorry average weighted average yields on earning assets.

Speaker Change: Mainly due to the continued improvement and as I said earlier to answer Russell's question.

Speaker Change: We do have a number of you know.

Speaker Change: Fixed rate maturities adjustable rate et cetera, and we're continuing as I said.

Speaker Change: To use cash flows from the securities portfolio to reinvest into that 8%, 8% loans. So we'd certainly expect those yields on earning assets to continue to increase.

Speaker Change: I appreciate the color.

Speaker Change: And our last questioner will be Daniel Cardenas with Janney Montgomery Scott. Please go ahead.

Daniel Edward Cardenas: And our last questioner will be Daniel Cardenas with Janie Montgomery Scott. Please go ahead.

Daniel Edward Cardenas: Good morning guys. Hey, good morning.

Daniel Edward Cardenas: Hey, good morning, guys.

Speaker Change: <unk>.

Daniel Edward Cardenas: Yes, most of my questions have been have been answered, but just just quickly on the <unk> card.

Daniel Edward Cardenas: Yeah, most of my questions have been answered, but just quickly on the multi-card contributions, it sounds like you're expecting to see some positive contributions in the back half of 24. When do you think the multi-card will be a more significant contributor to fee-based income? Is that kind of the second half of 25 or 26 events?

Daniel Edward Cardenas: Contributions.

Daniel Edward Cardenas: It sounds like you're expecting to see some positive contributions in the back half for 2004, when when do you think the multi card will be a more significant contributor too.

Daniel Edward Cardenas: The fee based income.

Daniel Edward Cardenas: The second half of 'twenty or 'twenty six of them.

Daniel Edward Cardenas: So right now we.

Jeffrey H. Jackson: I would, so right now, you know, we just launched. And we have about six multi-cards that we've just closed. We've got about 18 in the pipeline, and we've also got about nine integrated payables and opportunities right now that we're working on. So I believe you'll start seeing some good contribution toward the end of this year. But I think 2025 is where you'll really see some nice pick-up contribution from all of our new treasury opportunities that we're working on.

We just launched it and we have about six multi cards that we've just closed.

Daniel Edward Cardenas: We've got about 18 in the pipeline and then we've also got about nine integrated payables and opportunities right now that we're working on so I believe youll start seeing some some good contribution towards the end of this year, but I think 2025 is where you really see some nice pick up contribution from all of our new Treasury.

Daniel Edward Cardenas: Yes.

Daniel Edward Cardenas: Opportunities that we're working on.

Speaker Change: Okay, Great and then.

Daniel Edward Cardenas: And then, can you remind me, how big is your, in terms of personnel, is your treasury management function right now, and what are the expectations for additions to that team?

Speaker Change: Can you remind me how big is your in terms of personnel is your Treasury management function right now.

Speaker Change: What are your expectations for additions to that team.

Jeffrey H. Jackson: I think the treasury management team, I'm going to say, is probably just, and this is just sales people and management, I think it's around 12 to 15 people. But no, we're looking for significant contributions from that team this year and then going forward in the future. Not really detailing specific numbers, but no, we believe it's going to be very significant. Not only from a fee-based generation but also a deposit-gathering opportunity as well.

Speaker Change: I think the Treasury management team I'm going to say is probably just this is just salespeople and management I think it's around 12 to 15 people.

Speaker Change: But no we were looking for significant.

Speaker Change: Contributions from the from that team.

Speaker Change: This year and then going forward in the future I'm not really detailing specific numbers, but now we believe it's going to be very significant not only from our fee based generation, but also deposit gathering opportunity as well, but that's one of our key priorities. This year that we feel like we started off really strong so far and I feel like by the end of the year it'll be.

Jeffrey H. Jackson: But that's one of our key priorities this year, and we feel like we've started off really strong so far, and I feel like by the end of the year, it'll be a significant portion of our fee business.

A significant portion of our of our fee business.

Daniel Edward Cardenas: Great. Thanks, guys. I'll step back. Thank you.

Speaker Change: Okay, great. Thanks, guys I'll step back thank you.

Jeffrey H. Jackson: This concludes our question and answer session. I would like to turn the conference back over to Jeff Jackson for any closing remarks.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Jeff Jackson for any closing remarks.

Jeffrey H. Jackson: Thank you for joining us today. During the past quarter, we achieved solid loan, deposit, and fee income growth while managing costs and maintaining strong capital levels and credit quality. With this solid start to the year and the continued strength of our teams, markets, and strategies, we are well positioned to continue delivering value for our shareholders. We look forward to speaking with you in the near future at one of our upcoming investor events. Have a great day. Thank you.

Jeffrey H. Jackson: Thank you for joining us today during the past quarter, we achieved solid loan deposit and fee income growth.

Jeffrey H. Jackson: While managing costs, and maintaining strong capital levels and credit quality.

Jeffrey H. Jackson: With the solid start to the year and the continued strength of our teams markets and strategies, we are well positioned to continue delivering value for our shareholders.

Jeffrey H. Jackson: We look forward to speaking with you in the near future at one of our upcoming investor events and have a great day. Thank you.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].