Q1 2025 WesBanco Inc Earnings Call
Okay.
[music].
Good morning, everyone and welcome to the West Bank of first quarter 2025 earnings Conference call.
All participants will be in a listen only mode.
If you need assistance. Please you know a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May press Star and then one to withdraw your question you May Press Star two.
Please also note today's event is being recorded.
Speaker Change: I would now like to turn the conference call over to John Ionone Senior Vice President Investor Relations.
Speaker Change: Please go ahead.
Speaker Change: Good morning.
Speaker Change: The West Bancorp, Inc. 's first quarter 2025 earnings conference call.
Speaker Change: During the call today are Jeff Jackson, President and Chief Executive Officer, and Dan Weiss Senior Executive Vice President Chief Financial Officer.
Speaker Change: Today's call an archive of which will be available on our website for one year contains forward looking information.
Speaker Change: Cautionary statements about this information and reconciliations of non-GAAP measures are included in our earnings related materials issued yesterday afternoon.
Speaker Change: As well as our other SEC filings and Investor materials.
Speaker Change: These materials are available on the Investor Relations section of our website Wesbanco dotcom.
Speaker Change: All statements speak only as of April 30 of 2025, and West Banco undertakes no obligation to update them.
Jeff Jackson: I would now like to turn the call over to Jeff Jeff.
Jeff Jackson: Thanks, John and good morning.
Jeff Jackson: On today's call, we will review our acquisition of Premier financial.
Jeff Jackson: And our strong first quarter results.
Jeff Jackson: As well as provide an update on our outlook for 2025.
Jeff Jackson: He takeaways from the call today are <unk>.
Jeff Jackson: Successful completion of our acquisition of Premier.
Jeff Jackson: Improved net interest margin, which is expected to continue to improve through 2025.
Jeff Jackson: Strong organic loan growth that was fully funded by organic deposit growth.
Jeff Jackson: Yeah.
Jeff Jackson: Our first quarter results demonstrate continued solid operational performance as we again delivered strong organic loan and deposit growth, while driving positive operating leverage.
Jeff Jackson: We also continued to strengthen our balance sheet and net interest margin by funding loan growth with deposits and reducing higher cost borrowings.
Jeff Jackson: For the quarter ending March 31, 2025, we reported net income excluding merger and restructuring expenses and the day, one provision on acquired loans of $51.2 million and diluted earnings per share of 66 cents.
Jeff Jackson: Which is which increased 18% year over year.
Jeff Jackson: By significantly higher shares outstanding from the PSC acquisition.
Jeff Jackson: On a similar basis, our first quarter returns on average assets and tangible equity improved year over year to approximately 1% and 12% respectively.
Jeff Jackson: Reflecting our focus on organic growth and positive operating leverage.
Jeff Jackson: Bind with the benefits of the Premier acquisition, our net interest margin increased to 3.35% and our efficiency ratio improved to $58 six 2%.
Jeff Jackson: This quarter's key story was the successful acquisition of Premier financial elevating us into the ranks of the top 100 largest U S banks by asset size.
Jeff Jackson: This strategic merger expands and strengthens our market position and accelerates our long term growth strategy.
Jeff Jackson: We are pleased to welcome premieres talented team loyal customers and strong community partners to Wesbanco.
Jeff Jackson: We've retained nearly 90% of the premier employees and their response to our merger has been overwhelmingly positive both in our communities and our teams.
Jeff Jackson: I have already seen great examples of collaboration sparking new growth opportunities and I look forward to sharing the results with you in months ahead.
Jeff Jackson: As we move forward together.
Jeff Jackson: Our teams are focused on executing seamlessly integration and delivering on the full potential of the combined organization for all stakeholders.
Jeff Jackson: The strength of our strategies and teams are reflected in our performance with organic total income and commercial loan growth and organic deposit growth continuing to significantly outperform the monthly H eight data for all domestically chartered commercial banks on both a year over.
Jeff Jackson: A year and quarter over quarter basis.
Jeff Jackson: For the first quarter total deposits organically increased $922 million year over year, and $285 million quarter over quarter to more than $14 $4 billion.
Jeff Jackson: Importantly, this growth was driven by deposit categories other than certificates of deposits as organic deposit growth, excluding Cds was 5% year over year, and nearly 11% quarter over quarter annualized.
Jeff Jackson: Further deposit growth again fully funded our total organic loan growth.
Jeff Jackson: While there can be fluctuations quarter to quarter. Our plan is to still to fund full year loan growth with deposits.
Jeff Jackson: Yeah.
Jeff Jackson: First quarter organic loan growth was 8% year over year, and 4% quarter over quarter annualized.
Jeff Jackson: Driven by the strong performance of our banking teams across our markets.
Jeff Jackson: Total commercial loans organically increased 10% year over year, and almost 7% sequentially on an annualized basis, driven by commercial real estate.
Our commercial loan pipeline as of March 30, <unk> was approximately $1 3 billion with more than 25% attributable to premier.
Jeff Jackson: Reflecting our strong organic growth engine Wesbanco stand alone pipeline at March 31st improved approximately 18% from year end.
Jeff Jackson: In the three weeks since quarter end, our commercial pipeline has grown approximately 100 million to $1 $4 billion.
Jeff Jackson: Based on the current loan pipeline, we continue to expect mid single digit loan growth during 2025.
Jeff Jackson: Yeah.
Jeff Jackson: This continued growth is made possible by the strength of our markets and lending teams are working across business lines to meet customers' needs and drive growth.
Jeff Jackson: One example, highlights a collaborative effort across commercial products Treasury management, and private banking to deliver a tailored solution and secure a significant win with an Ohio customer.
Jeff Jackson: Consistent with our mission.
Jeff Jackson: The team tailored a loan structure to meet the customers' unique needs closing, a 50 million dollar loan and securing $45 million in deposits and a 1 million dollar fee income item.
Jeff Jackson: As well as significant near term Treasury management and private banking opportunities.
Jeff Jackson: Turning briefly to the macroeconomic environment.
Jeff Jackson: The equity markets are extremely volatile right now, reflecting the threat of trade wars due to constant fluctuations and tariff pronouncements.
Jeff Jackson: While these pro announcements are likely negotiating tactics the eventual outcome of trade negotiations remain unclear.
Jeff Jackson: And it is too early to accurately gauge potential impacts if any.
Jeff Jackson: However, the benefit of our loan portfolio is its variety and granularity spread across our economically diverse nine state footprint, which provides soundness and stability if an industry or a region is struggling.
Jeff Jackson: Roughly 17% of our total portfolio was in our mid Atlantic region.
Jeff Jackson: With roughly a third of that residential related and it spans our footprint across the state of Maryland.
Jeff Jackson: In fact, the percentage of this that falls within the D. C MSA is less than 0.7%.
Jeff Jackson: With roughly half of that residential.
Jeff Jackson: Further we do not have a government contract or line of business and our total office investment portfolio is less than 4% of our total loan portfolio and our solid loan to value and DSC ratios.
Jeff Jackson: We're staying close to our customers and continually monitoring our portfolios to proactively manage risk and help our customers navigate evolving market dynamics.
Speaker Change: I would now like to turn the call over to Dan Weiss, our CFO for details on our first quarter financial results and our current outlook for 2020 five Dan.
Dan Weiss: Thanks, Jeff and good morning.
Dan Weiss: For the quarter ending March 31, 2025, we reported GAAP net income available to common shareholders of negative $11 5 million or <unk> 15 per share.
Dan Weiss: When excluding the day, one provision for credit losses and merger related expenses from the Premier acquisition net income was $51 2 million or 66 per share representing an increase of 54% from $33 2 million or 56 cents per share in the prior year period.
Dan Weiss: To highlight a few of the first quarter's accomplishments, we successfully closed our acquisition of Premier financial.
Dan Weiss: Generated strong year over year pre tax pre provision earnings growth of 25%.
Dan Weiss: Grew both loans and deposits organically improve the net interest margin and reduce the efficiency ratio. We also restructured the premier balance sheet through securities restructuring unwound, the macro hedges paying down higher cost brokered deposits.
We remain on pace to exit $140 million of commercial loans during the second quarter.
Dan Weiss: And remain on track to exit the mortgage servicing business in the coming months.
Dan Weiss: So we're excited about the opportunities that lie ahead and pleased with the success of our strategy is playing out according to our plan.
Dan Weiss: Our balance sheet as of March 31 reflects the benefits of both the premier acquired balance sheet and organic growth.
Dan Weiss: Oh assets increased 54% year over year to $27 $4 billion, which included total portfolio loans of $18 7 billion total securities of $4 3 billion and the addition of approximately $480 million in goodwill generated from the acquisition.
Dan Weiss: Total portfolio loans increased 57, 3%, reflecting $5 $9 billion from premier and $921 million from organic growth, which as Jeff mentioned was driven by strong performance by our banking teams across our markets.
Dan Weiss: We remain optimistic about future loan growth with our strong pipeline banking teams in markets combined with more than $1 billion in unfunded land construction and development commitments expected to fund over the next 18 months.
Dan Weiss: During March we sold approximately $775 million of Premier Securities and purchased $475 million of higher coupon fixed rate securities and use the excess proceeds to pay down higher cost borrowings, which provided immediate benefit to the first quarter net interest margin.
Dan Weiss: Deposits of $21 $3 billion increased 58% versus the prior year due to premier deposits of $6 9 billion and organic growth of $922 million.
Dan Weiss: Our organic deposit growth fully funded loan growth on both a year over year and sequential quarter basis.
Dan Weiss: Further when excluding Cds, we realized organic deposit growth of four 8% year over year, and 10, 6% quarter over quarter annualized.
Dan Weiss: Okay.
Dan Weiss: Credit quality continues to remain stable with key metrics have remained low from a historical perspective and within a consistent range. The last five years.
Dan Weiss: First quarter provision for credit losses was $69 million with 59 million related to the day, one non P. C D provision.
Dan Weiss: For credit losses was $234 million at March 31, which increased the coverage ratio to 1.25% from $1 one 1% as of December 31 2024.
Dan Weiss: The first quarter margin of 3.35% improved 32 basis points compared to the fourth quarter and 43 basis points on a year over year basis through a combination of higher loan and securities yields lower funding costs and purchase accounting accretion.
Dan Weiss: Interest rate Mark accretion from the Premier acquisition. In addition to the securities restructuring benefited the first quarter net interest margin by approximately 25 basis points.
Dan Weiss: Deposit funding costs of 255 basis points for the first quarter decreased as compared to 271 basis points in the fourth quarter of 2024, and 256 basis points in the prior year period.
Dan Weiss: When including noninterest bearing deposits deposit funding costs for the first quarter for 188 basis points.
Dan Weiss: In conjunction with the closing of our acquisition of Premier interest accretion added approximately $8 $4 million to net interest income in the first quarter, mostly from loan accretion of $6 2 million as well as $1 9 million from C. DS.
Dan Weiss: The P. C D book totaled $220 million with an interest mark of four 3% and credit mark of roughly $30 million.
Dan Weiss: $6 billion and Premier loans were identified as non P. C D with an interest mark of $270 million, representing approximately four 5% and a credit mark of roughly $60 million, representing a 1% credit mark both of which will be accreted to <unk>.
Dan Weiss: Come over the life of the portfolio.
Dan Weiss: The interest Mark on C. DS was $11 million with the majority to accrete over the next nine to 12 months and interest marks on other borrowings were relatively small.
Dan Weiss: For the first quarter noninterest income totaled $34 7, million% to 13% increase from the prior year period due primarily to the Premier acquisition net swap fee in valuation income was down due to fair market value adjustments from recent rate volatility. However, our gross swap fees increased one.
Dan Weiss: $2 million year over year to $2 million.
Dan Weiss: Noninterest expense, excluding restructuring and merger related costs for the three months ended March 31, 2025 was $114 million an increase of 17, 2% year over year due to the addition of premier's expense base and higher amortization of intangible assets.
Dan Weiss: Equipment and software expense of $13 1 million includes the additional costs of operating two core systems until conversion to one platform and bid day.
Dan Weiss: Amortization of intangible assets of $4 $2 million increased $2 1 million year over year due to the core deposit intangible asset that was created from the Premier acquisition, excluding the impacts of from the addition of Premier our legacy cost base was roughly flat to the fourth quarter.
Dan Weiss: <unk>.
Dan Weiss: Turning to capital our regulatory ratios remain above the applicable well capitalized standards in conjunction with the February 28 closing of the Premier financial acquisition, we converted all of Premier's outstanding common shares and the $28 7 million Wesbanco shares, which increased total capital by one.
Dan Weiss: Billion dollars.
Dan Weiss: And as anticipated modestly impacted our capital ratios. It's also worth noting here that under the regulatory definition for the calculation of the leverage ratio period and capital is divided by average assets, which included just one month of premier's balance sheet. Therefore, the reported ratio of 11 point, 11%.
Dan Weiss: <unk> is expected to come down into the high 8% range on a full quarter basis.
Dan Weiss: Turning to our current outlook for the remainder of 2025, which includes the benefit from our acquisition of Premier. We are currently modeling 225 basis point fed rate cuts in June and September however, given our relatively neutral rate sensitive position, we do not expect a meaningful impact.
Dan Weiss: Our net interest margin from these cuts.
Dan Weiss: We anticipate approximately two thirds of our $3 billion C D book to mature or reprice lower over the next six months with.
Dan Weiss: And average interest rate of three 9% as compared to our current seven month CD rate of 3.5%.
Dan Weiss: We anticipate premier related accretion during the second quarter to add approximately 15 to 20 basis points to the first quarter margin.
Dan Weiss: And therefore expect to break through a three 5% margin during the second quarter.
Dan Weiss: Nearly all fee income categories will be positively impacted by the Premier acquisition and as a reminder, first quarter trust fees include tax preparation fees totaling roughly $700000. Excluding these fees trust fees as well as securities brokerage revenue for the remainder of the year should be modestly higher in future.
Dan Weiss: Orders, reflecting modest organic growth.
Dan Weiss: And the benefit of our new markets and newly acquired assets under management.
Dan Weiss: Electronic banking fees and service charges on deposits, which are subject to overall consumer spending behavior should increase from the first quarter, reflecting the addition of premier's markets. Despite the Durbin amendment impact expected to be $1 million per quarter from premiers historical run rate.
Dan Weiss: Mortgage banking income should improve modestly reflecting the opportunities in our new markets, but we'll continue to be impacted by the overall residential housing market and economic trends and interest rates.
Dan Weiss: And finally gross commercial swap fee income excluding market adjustments should be in a similar range to the first quarter.
Dan Weiss: As we stated in the past we remain focused on delivering disciplined expense management to drive positive operating leverage and we will continue our efforts throughout 2025.
Dan Weiss: During the second quarter, we will be operating two core systems and have a higher staffing level as planned to facilitate our core system conversion in mid May which will drive a slightly higher expense base before the remaining cost saves are realized and fully reflected in the third quarter run rate.
Dan Weiss: With Premier's core deposit intangible of 151 5 million, representing 328% of core deposits.
Dan Weiss: Amortization of intangible assets is expected to be roughly $9 million per quarter up from the $4 million reported in the first quarter as we realize the full quarter impact of the amortization of the intangible assets created from the Premier acquisition.
We believe the temporary costs of preparing for the core system conversion during the second quarter will be similar to our anticipated midyear Merit increase and therefore, most of the 26% cost savings should be reflected in the third quarter and we expect the expense run rate will be in the $140 million range.
Dan Weiss: For the remaining quarters of 2025, which reflects legacy Wesbanco is 100 million dollar cost base. The addition of premier's cost base after cost savings midyear merit increases and higher intangible amortization.
Dan Weiss: Amortization.
Dan Weiss: The provision for credit losses 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.
Dan Weiss: Delinquency changes in prepayment speeds and future loan growth and lastly, our anticipated full year effective tax rate is expected to be between 19, and 19, 5% subject to changes in tax regulations in taxable income levels. This increase from last quarter is due to non deductible costs related to the premier.
Dan Weiss: Acquisition.
Dan Weiss: We further expect the bulk of the remaining merger related expenses totaling approximately $45 million to be recognized in the second quarter as contract terminations severance and retention bonuses mostly occurred then.
Dan Weiss: Operator, we're now ready to take questions would you. Please review the instructions.
Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session.
Speaker Change: Ask a question you May press Star and then one on your Touchtone salaries. If you are using a speaker phone. We do ask that you. Please pick up your handset prior to pressing the keys.
Speaker Change: Would you ask you please limit yourselves to one question and a single follow up.
Speaker Change: So all your questions you May press star two.
Speaker Change: Again that is star and then one did you want in the question queue.
Speaker Change: Sure.
Speaker Change: Our first question today comes from Andrew Liesch from Piper Sandler. Please go ahead with your question.
Speaker Change: Thanks, Good morning, guys.
Speaker Change: On the margin looking forward here appreciate the commentary with the addition, and the accretion from Premier.
Speaker Change: But on an organic basis, how do you think it can perform absent rate cuts.
Speaker Change: Like you.
Speaker Change: Loan yields on new production was up a little bit I mean, maybe there's some.
Speaker Change: The opportunity to reduce funding costs with the C DS, but how should we be looking at the margin front at more on an organic basis.
Andrew Liesch: Yes, Andrew I'll take that one.
Andrew Liesch: Yes, similar to what we discussed last quarter on a kind of organic legacy basis, we anticipate roughly four to six basis points of margin.
Andrew Liesch: The margin improvement per quarter.
Andrew Liesch: You know with with Premier in the fold representing about a third of the overall balance sheet I might call that maybe it's three to five basis points or two to four basis points of legacy improvement in over the reasons that we discussed last quarter as well, obviously as we talked the Cds.
Andrew Liesch: Repricing downward.
Andrew Liesch: Certainly we are anticipating right now.
Andrew Liesch: Fed cut in June that would have an impact on the on the.
Andrew Liesch: Federal home loan bank borrowings most of which are one month advances.
Andrew Liesch: It's currently right around four 5% those would reprice down immediately as.
Andrew Liesch: Wood or a variable rate commercial loans and securities. So yeah.
Andrew Liesch: A couple of things that we did do and we talked about the securities restructuring a little bit.
Andrew Liesch: But one of the things that we would anticipate.
Andrew Liesch: That's outside well even outside of the restructuring we did as we said in the past have been evaluating our floating rate Securities book. This is west bankers floating rate Securities book, representing about 16% of the overall securities in the quarter in February we did sell about $100 million.
Andrew Liesch: Added these are floating rate securities at about a $40000 gain.
Andrew Liesch: The yield on those was about $4 94 for 94%, we reinvested about $100 million and got a book yield of about five and a half per said and only picked up about four tenths of a year in duration. So that also should be kind of part of that I would say tailwind towards.
Andrew Liesch: Margin expansion on an organic.
Speaker Change: Got it alright, that's helpful. Thanks.
Andrew Liesch: And then that 140 million dollar expense number.
Andrew Liesch: It sounds like the cost saves from the deal are on track or maybe even a little bit ahead of schedule.
Andrew Liesch: But just some clarity is that $140 million for the third quarter and the fourth quarter or are there still going to be some legacy costs before they're all realized the 140 number is a better number for the fourth quarter.
Andrew Liesch: No I would say right now we're modeling in that low 140 range for each of the next three quarters.
Andrew Liesch: And again you know it's.
Andrew Liesch: Obviously second quarter is really due to.
Andrew Liesch: The combined.
Andrew Liesch: Of course, the all of the cost saves haven't been taken out we don't expect to be taken out really until June 30th Boy.
Andrew Liesch: We do have a little bit of spillover into the third quarter, Our trust conversion our securities brokerage.
Andrew Liesch: Conversion and some of our MSR assets are likely to you know to be still.
Andrew Liesch: Service for a short period of time in the third quarter. So there.
Andrew Liesch: There might be a little bit of additional kind of duplication of costs there, but for the most part we expect to see that 26% fully baked in in the fourth quarter for sure and mostly baked in in the third quarter and as you know.
Speaker Change: There were some cost saves on the salaries and wages are fraught here.
Andrew Liesch: Yeah.
Andrew Liesch: As of February 28.
Andrew Liesch: With some folks, leaving one you know kind of legal day one.
Speaker Change: Right right.
Speaker Change: Great. Thank you for that clarity I'll step back.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Catherine Mealor from K B W. Please go ahead with your question.
Catherine Mealor: Thanks, Good morning, Hey, good morning, good morning.
Speaker Change: I wanted to dig a little bit into the margin.
Speaker Change: Couple of lines, if you don't mind the first on the Bond book do you have I know, there's a lot of moving parts is there any way for you to disclose where your bond yields where maybe at quarter end when we get that kind of a full impact of the boundaries structure and maybe kind of where we're starting this quarter.
Speaker Change: Yeah, So what I would tell you specific to the restructure.
Speaker Change: He said sold $775 million and if we think about.
Speaker Change: You know that those those securities were yielding about 3% on premier's books.
Speaker Change: The markup was about four point was up to 486% on those sold we reinvested as we said $475 million at a yield of about four five excuse me, 543%. So we picked up 57 basis points.
Speaker Change: Kind of one that reinvestment focused on mortgage backs and Cmos.
Speaker Change: You have to improve legibility certainly.
Speaker Change: And as you know a F S.
Speaker Change: But I would tell you that if we look at you know kind of spot securities.
Speaker Change: Yields at the end of March.
Speaker Change: Is.
Speaker Change: It's right around 307.
Speaker Change:
Speaker Change: And so hopefully Catherine that kind of helps to explain where we.
Speaker Change: Where we're at.
Speaker Change: Yeah. That's yeah, that's great that's great. Okay, that's perfect and then.
Speaker Change: And then on the deposit side.
Speaker Change: I know premier had a higher deposit base and you did but and we only have a partial quarter. So.
Speaker Change: Is it fair to assume that deposit costs actually increase next quarter. Once we kind of get the full impact or are we still kind of stable and deposit costs relative to the quarter, we've seen that that 188 level.
Speaker Change: Yeah, No I think I think that we do see some continued reduction in deposit cost for certainly on the CD front as kind of we've talked about in the past.
Speaker Change: At this point, we have implemented our pricing.
Speaker Change: Pricing of deposits that's been fully implemented at premier.
Speaker Change: So we think that we can we're going to be patient.
Certainly with with with the deposits there but.
Speaker Change: We do think that we're going to see some improvement in overall funding costs here.
Speaker Change: Maybe in the 10 basis point range coming off of first quarter.
Speaker Change: Okay great.
Speaker Change: And then M&A back Oh actually.
Speaker Change: I'm, just going to kind of hit a couple of lines of Lam and I got asked any questions come in on an S. H L. E. I know you've got a billion for come in often S. H L D.
Speaker Change: Do you expect to shrink the balance sheet by that amount or just reinvest it in Q.
Speaker Change: Thank you Avi.
Speaker Change: Yeah, I would say, it's going to be the the at this point the shrinkage of the balance sheet is really dependent upon a couple of things first.
Speaker Change: We're obviously monitoring the securities book, we did shrink that somewhat is represents about 16% right now of total assets. That's on kind of I would say the lower end of the range for where we want to be to maintain the what we feel are appropriate levels of liquidity to maintain pledging for our public funds.
Speaker Change: And such so I.
Speaker Change: I don't see us necessarily shrinking that I would tell you, though we.
Speaker Change: We're holding a little more cash than what we have historically historically, we try to target around two and a half a percent of total assets, 2% to 3%.
Speaker Change: As of period end, we were holding about 4%. So we could see a 100 million or so potentially.
Speaker Change: Reduction in FH L P. There, but generally speaking.
Speaker Change: The expectation is we would continue to fund our loan growth.
Speaker Change: With with deposit growth and FHA will be boring with gena.
Speaker Change: Generally kind of fill in any gaps there, but we would maintain the securities book to be about 16% to 17% of the overall balance sheet cash or right around 3%.
Speaker Change: Okay. Okay, that's great and then if I could just round out the margin.
Speaker Change: <unk> went back up to loan on your.
Speaker Change: In your comment you said that you expect fair value accretion to be 15.
Speaker Change: 20 basis points over the first quarter. So that's not 15 to 20 basis points of fair value accretion that increase from the first quarter, that's exactly right Kathryn.
Speaker Change: That's a build a 15 to 20 basis points on the 335% that we reported here in the first quarter.
Speaker Change: Okay, Great and says it all that together, you're saying you're going to get through this 350 margin.
Speaker Change: How conservative do you feel with that number because I feel like.
Speaker Change: I'm, giving you the bottom does not the coffin [laughter] Oh, yeah, I'm getting hot when I put all that together, it's a bigger number did that say you are very conservative with that 330.
Speaker Change: Yeah, I think so.
Speaker Change: Okay, Alright, great awesome. Thank you for all for letting me ask all the questions I appreciate it.
Speaker Change: Our next question comes from Daniel Tamayo from Raymond James. Please go ahead with your question.
Daniel Tamayo: Thank you.
Daniel Tamayo: Hey, guys.
Daniel Tamayo: Hey, good morning, Dave Good morning.
Speaker Change: So we've we've hit the margin a lot I appreciate all that guidance there.
Speaker Change: Talked a little bit about the balance sheet, but maybe we could dig in just a little bit more to try and put a finer point on on where.
Speaker Change: Where net interest income I might end up this year. So I you know I'll ask you directly if you have any comments on on what you think net interest income numbers could look like for the rest of the year.
Speaker Change: If not or in addition, if you if you.
Speaker Change: Could kind of size for us how youre thinking about just absolute balance balances on the asset side going forward given all the moving parts you've talked about whether there'll be an N. The securities restructurings in loan growth, obviously baked in so just curious how in your in your mind or budget, how it how you think the size of the assets in <unk> net.
Speaker Change: Interest income could move the rest of the year.
Speaker Change: Yeah, I would say you know.
Speaker Change: We certainly anticipate still at mid to upper single digit loan growth.
Speaker Change: And that to be fully funded with deposits so that kind of an.
Speaker Change: <unk> already talked about kind of there'll be other levers on the balance sheet and what the percentages would be so I think that kind of helps guide.
Speaker Change: What we would be expecting for the balance sheet by the end of the year.
Speaker Change: As it relates to net interest income.
Speaker Change: We typically wouldn't give a whole lot.
Speaker Change: Deep guidance here, but what I, what I can tell you and I think that should help clear up at least some parts of this is the.
Speaker Change: The accretion that we are anticipating as a result.
Speaker Change: Of.
Speaker Change: The Premier deal.
Give that and these are kind of rough estimates at this point, we're still finalizing our purchase accounting.
Speaker Change: But you know we talked about there the <unk>.
Speaker Change: Overall interest Mark on the non PCB book is roughly $270 million, that's a four 5% mark.
Speaker Change: Credit Mark which is also would be accreted through interest income is right around $60 million. So that's one.
Speaker Change: 1% roughly and.
Speaker Change: And overall when including the PCB book as well, we still have about a four 5% interest mark and about a one 6% credit Mark.
Speaker Change: And of course, some of that on the PCB side, it would not be accretable, but if we think about the accretion the breakdown here or that we're showing today.
Speaker Change: Could fluctuate again based on prepayment speeds in the future et cetera is right around $59 million here in this is for loans.
Speaker Change: In 2025 around $60 million in 2026 $50 million in 2027.
Speaker Change: Again, this is going to be very much subject to.
Speaker Change: Additional review and very much dependent on interest rates.
Speaker Change: In the future as that would influence prepayment speed. So we do have some prepayment speed assumptions baked into this.
Speaker Change: But that's kind of you know.
Speaker Change: What we see today based on everything that we know.
Speaker Change: Okay. That's very helpful. Dan I appreciate it.
Speaker Change: Maybe switching gears here, we are we haven't talked about credit and the questions section at least yet.
Speaker Change: And everything looked pretty pretty good I guess, there was a you know.
Speaker Change: Somewhat of an increase in criticized loans in the quarter I'm assuming that's.
Speaker Change: That's from the the acquisition, maybe you could give a little color around the increase there and if you have any thoughts on.
Speaker Change:
Speaker Change: Kind of go forward.
Speaker Change: Charge off expectations and or provision however, you want to.
Speaker Change: Guide us in terms of how we should think about that.
Speaker Change: Yeah, I can start no I think most of that CNC is just normal course of business and related to that from your acquisition as well as just you know how we're seeing things today I think if you look at the provision.
Speaker Change: It was it was up a lot of that was due to obviously the acquisition. We also did have one credit that we took a larger provision online, but I feel very good about that working through that the rest of the year or so.
Speaker Change: I would say overall, we still feel very good about our credit metrics, we still feel like we're going to be better than our peer group better than the industry.
Speaker Change: At this point, we're not really seeing any sort of outsize risk in any sort of market.
Speaker Change: As I mentioned in my earlier comments.
Speaker Change: We have very very very limited exposure to the D C market.
Speaker Change: Specifically and so feel good about that as well as obviously, having a nine state footprint, we have a very diverse portfolio and so I would say I think our where we're at obviously will fluctuate quarter to quarter, but we feel very good with the range. We're in today.
Speaker Change: Okay in terms of.
Speaker Change: Kind of recent net charge off activity, that's what you're referring to yes.
Speaker Change: Yes.
Speaker Change: Got it okay, alright, thanks for taking my questions guys.
Speaker Change: Our next question comes from Russell Gunther from Stephens. Please go ahead with your question.
Russell Gunther: Hey, good morning, guys.
Russell good morning.
Russell Gunther: I wanted to follow up on the expenses first to just confirm that the <unk> run rate provided is fully inclusive of all deal related cost saves them then to enquire about how we should think about a normalized growth rate from there.
Russell Gunther: Yes.
Russell Gunther: Yeah.
Russell Gunther: Yeah, Russell I would say that yet.
Russell Gunther: Fourth quarter <unk> run rate would be inclusive of all of all cost saves it certainly looks.
Russell Gunther: Like we said in the you know.
Russell Gunther: Low of 140 range.
Russell Gunther: And I would.
Russell Gunther: Anticipate.
Russell Gunther: Probably a 4% call it 4% to build off of there as we look towards 2006 and beyond.
Speaker Change: Okay, great. Thanks, Dan.
Speaker Change: And then just my my second question would be on capital so with CET one around 10%. Yeah. How are you guys thinking about managing this ratio going forward and what does that suggest for capital deployment beyond loan growth, specifically any appetite for buybacks or M&A.
Speaker Change: Yes.
Speaker Change: Yeah, I would say today were in capital build mode for the next several quarters.
Speaker Change: And you know in terms of capital deployment, and how we might deploy that through M&A or buyback I'll maybe.
Speaker Change: Jeff.
Jeff Jackson: Yes, as Dan said, we're still building back the capital obviously.
Jeff Jackson: You know we need to digest. This transaction, we're gonna have conversion coming up in a few weeks, we expect that to go really really well.
Jeff Jackson: And then you know if we were ever to look.
Jeff Jackson: Look to announce or another deal it'd probably be way end of this year early first quarter second quarter. At this point, we're really focused on getting premier squared away, making sure everything is running very smoothly.
Jeff Jackson: Then you know taking it from there, but we're in no hurry to do another deal or I would say at this point, we're just trying to build back capital.
Jeff Jackson:
Jeff Jackson: Hopefully that answers your question.
Jeff Jackson: Yes, it does.
Jeff Jackson: Thank you both for taking my questions.
Jeff Jackson: Yeah.
Speaker Change: Our next question comes from manual Natus from D. A Davidson. Please go ahead with your question.
Speaker Change: Hey, can I, just clarify the NIM a little bit.
Speaker Change: So PAA gets you to that 350 to 355 range next year and then you have just organic legacy NIM improvement and there were two range or is it three to five basis points on top.
Speaker Change: At four to six basis points on top potential yeah, yeah, yeah, well I would say I would say three to five so.
Speaker Change: The four to six was what we disclosed last quarter.
Speaker Change: For like West Bank of legacy so.
Speaker Change: So if we think about you know.
Speaker Change: Obviously, the purchase accounting accretion and marking premier's balance sheet, which represents roughly a third of our assets and.
Speaker Change: Interest income.
Speaker Change: You know what.
Speaker Change: I would just say you have to kind of basically two thirds of the four to six which is I would say kind of more three to five would be additive.
Speaker Change: Okay, I appreciate that and.
Speaker Change: Can you add a little bit more color on any balance sheet.
Speaker Change: Items that still need to be done I know you're going to there's a couple of loan sales that that should come through next quarter.
Speaker Change: Anything else, it's still to come and maybe is there any more securities restructuring that you're going to do that kind of all done with that spot rate. You gave is there anything left to come on.
Speaker Change: Balance sheet.
Speaker Change: This coming quarter.
Speaker Change: Yes.
Speaker Change: Security is pretty well pretty well done.
Speaker Change: Secondly, we've got the the loan sale about $140 million that could be sold.
Speaker Change: Roughly.
Speaker Change: That marked down to about 100.
Speaker Change:
Speaker Change: Certainly the MSR.
Speaker Change: Business is something else that is expected to kind of close out over the next several months probably will.
Speaker Change: To wrap that.
Speaker Change: Lately up here in the <unk>.
Speaker Change: Early in the third quarter.
Speaker Change: But no I think that really covers the majority of the of the balance sheet restructuring I mean, we certainly do have you know later in the year.
Speaker Change: Our preferred stock does become callable and so we'll be evaluating that along with.
Speaker Change: Yes, some of the sub debt that we acquired from Premier It would kind of potentially refinancing that to take advantage of it.
Speaker Change: You have some savings there but nothing.
Speaker Change: Nothing significant outside of that.
Speaker Change: Kind of shifting direction, a little bit can you talk about the puts and takes in the loan growth outlook.
Speaker Change: The pipeline is strong.
Speaker Change: What are your expectations for pull through has there been any kind of shifts or delays in and your customer and your customer base with pull throughs.
Speaker Change: Great any uptick in pay off activity since the end of the first quarter and some discussion on the different regions like which ones are doing well, which ones could be better than just kind of a a little bit more on the puts and takes behind her.
Speaker Change: The loan growth.
Speaker Change: Sure.
Speaker Change: So as I mentioned, you know our pipelines continue to grow other combined I believe its about $1 4 billion and that's pretty solid pipeline. So there's obviously other stuff beyond that.
Speaker Change: I wouldn't I would say as far as pull through we're still seeing customers do a lot of business. We have seen a few things pull back due to tariffs just waiting to see but overall I feel very good about the loan growth that mid single digit to potentially upper single digit loan growth. If you look at the kind of the markets that are there.
Speaker Change: They're doing really well from a pipeline perspective.
Speaker Change: I do know our L. P. O's continued to be I believe 20% to 25% of the pipeline of legacy Wesbanco.
Speaker Change: With Chattanooga in Nashville, and Indianapolis, showing really strong growth there the whole state of Ohio, Obviously with the addition of Premier we are getting a lot more opportunities to pull through there and then we are seeing.
Speaker Change: Good pipelines over in the mid Atlantic region also.
Speaker Change: So overall I would say it looks very similar to last year.
Speaker Change: With the addition to Premier we should see more I would say more C&I pipeline because of that.
Speaker Change: Franchise in that market those markets tend to lean more C&I, which is good for us and we are seeing more opportunities there that we're able to capitalize on.
Speaker Change: Once again overall, we feel very good about our mid to upper single digits.
Speaker Change: As far as loan growth have not seen any slowdown as far as pull through once again, a few customers he things due to tariffs, but overall I think it's still unknown and the impacts there.
Speaker Change: I appreciate that and the deposit growth has been excellent and our pipeline is similar on that side of the house.
Speaker Change: How much of that is coming from the commercial teams themselves and.
Speaker Change: I'll step back into the queue.
Speaker Change: Yes, we had a very good first quarter in deposits I would expect this year to look very similar to last year as it relates to deposit. So as you remember we grew deposits in first quarter last year. We grew them. This year that looked really really good.
Speaker Change: In the second quarter, you do have tax time. So you do see typically a little bit of a dip and then it builds back toward the end of the second quarter, but I would say the deposit pipeline still look very good as well.
Speaker Change: And a lot of it is commercial we do have some some really good opportunities ahead of US are also on the Treasury management side too.
Speaker Change: I do believe we have a lot of new purchase car T and products in place too that we hope to build over the next several quarters our revenue there as well.
Speaker Change: Thank you. Thank you for your time okay.
Speaker Change: Thank you. Our next question comes from Karl Shepard from RBC Capital markets. Please go ahead with your question.
Speaker Change: Hey, Good morning, guys, Hey, good morning, Carl Good morning Girl I got a few ones for you.
Speaker Change: On capital I think the message you're trying to send is you have ample capital for all the organic growth do you want to do but just kind of waiting to build back to more normalized level is that fair.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: And then at deal announcement, we talked a little about a little bit about CRE concentration.
Speaker Change: I just have a quick update there.
Speaker Change: But CRE loans on.
Speaker Change: Yeah, So we calculate our CRE concentration ratio.
Speaker Change: As a percentage of total risk based capital at the bank level.
Speaker Change: And at the bank level, we are calculating right around 298%.
Speaker Change: Which is obviously under the guideline.
Speaker Change: I know many like to focus on total risk based capital at.
Speaker Change: The Holdco, which is obviously significantly lower than that 298.
Speaker Change: But yes, we're going to continue to monitor.
Speaker Change: Those levels and wouldn't be.
Speaker Change: It'll be dependent upon kind of CRE growth here.
Speaker Change: Quarter to quarter or is it ebbs and flows.
Speaker Change: It wouldn't be a <unk>.
Speaker Change: Concerned if we if we eclipsed that 300% threshold and kind of bouncing right around that for some period of time as we continue as we continue obviously to build back capital though.
Speaker Change: Coming back at a pretty pretty nice clip through.
Speaker Change: The organic.
Speaker Change: Margin as well as the accretion.
Speaker Change: We do think that.
Speaker Change: That is going to continue to work its way back.
Speaker Change: Back downward, but we do have you know typically the seasonal CRE growth occurs in second and third quarter.
Speaker Change: So, we'll see where we land there.
Speaker Change: Okay.
Speaker Change:
Speaker Change: The balance sheet is call it 50% larger today than it was three months ago does that change any way you think about running your business or open up any strategic opportunities or how should how should we think about the way you guys are approaching that or anything that's rattling around in your head.
Speaker Change: Yeah, I think it obviously gives us a bigger balance sheet too.
Speaker Change: A link to our stronger customers, we're doing that right now, especially as we look at our new Premier top customers, where we've already done an analysis on potential lending opportunities, where we can lend more to them than say legacy Premier has has looked at in the past.
Speaker Change: It has also given us.
Speaker Change: An opportunity to look at are there certain lines of business that maybe we wouldn't have gone into.
Speaker Change: That where we're doubling down on looking at to move into.
Dan Weiss: Now moving forward. So we're looking at all those different things Dan I don't know if there's anything else you would add.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And then one last one for me if you go back to the merger deck last summer I think you had a pro forma of $3 59 of EPS for this year with fully phased in cost savings and I don't want to pick over a line by line against don't have a ton of all party, but that number it feels like it should be achievable.
Speaker Change: Accretion seems dialed in with the high mortgage book and the margins tracking a little bit better pre closed.
Speaker Change: Is there anything that you would steer us away from thinking about.
Speaker Change: And that was in that attack other than what we've talked about already.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah Carl.
Speaker Change: <unk>.
Speaker Change: That $3 59 is that I assume thats excluding merger related.
Speaker Change: And probably excluding.
Speaker Change: The kind of day, one double count on the provision for credit losses.
Speaker Change: Yes, Yep Yep.
Speaker Change: Yeah, I would say given all of the all of the guidance that we provided that should be within the rent within range then certainly yeah. Okay.
Speaker Change: Thank you both for all the help.
Speaker Change: And our last question today comes from David Bishop from Hockey Group. Please go ahead with your question.
David Bishop: Hey, good morning, gentlemen.
Speaker Change: Hey, good morning.
Speaker Change: Hey, Jeff just curious.
Speaker Change: You know obviously with the added exposure to.
Speaker Change: Maybe more manufacturing C&I type market I'm sure you guys are aware of the impact of tariffs. Just curious have you been able to do any sort of stress testing or any thoughts in terms of.
Speaker Change: The legacy Premier book are in terms of tariff exposure, maybe even the legacy Wesbanco book, maybe where you see some I guess exposure there to increase tariffs across the commercial loan book.
Speaker Change: Yeah, we've taken a look at both books, obviously, a premier book, we've looked at multiple times pre clothes and post close and so we've gone through that once again, you know tariffs, it's kind of an unknown right now, but we have looked at different C&I exposure and you know.
Speaker Change: Legacy Wesbanco, we were not as big in C&I.
Speaker Change: And so but we are taking a look at it at the current portfolio, but I would say at this point, we don't feel like we have a significant amount of exposure to the tariffs, but once again, there's a lot of unknowns. So I wish I could answer your question better.
Speaker Change: A lot of unknown at this point.
Speaker Change: Understood understood and then final question.
Speaker Change: Maybe a little bit of our guidance.
Speaker Change: Guidance on the fee income side of the house.
Speaker Change: I assume you guys will be lay around your legacy swap products and such just curious maybe I don't know.
Speaker Change: For a specific number but maybe you know.
Speaker Change: Percentage growth or percent of average assets, how you sort of see that trending out over the course of the year.
Speaker Change: Yeah, I think we certainly see opportunities, particularly even as you've mentioned there.
Speaker Change: On the on the swap fee income for example.
Speaker Change: <unk>.
Speaker Change: Certainly.
Speaker Change: This first quarter here only includes one month's of fee income from.
Speaker Change: From Premier So we would expect to see a nice bump here.
Speaker Change: In the in the second quarter as we realize the full quarter's effect of the fee income.
Speaker Change: I would say today.
Speaker Change: You can see the trends pretty cleanly, if you compare fourth quarter.
Speaker Change: Two first quarter for the most part with the exception of.
Speaker Change: Swap of net swap fee income, which obviously has some some negative fair value adjustments there.
Speaker Change: With the exception of boldly and with the exception of insurance.
Speaker Change: Mostly the improvement that you see.
Speaker Change: You know kind of fourth quarter versus third quarter.
Speaker Change: Is representative of about one month of Premier So if you.
Speaker Change: You can get there by almost multiplying the defer the delta for those areas.
Speaker Change: Three.
Speaker Change: To get you know kind of your full quarter run rate for second quarter and beyond.
Speaker Change: If that's helpful. I was just also just mentioned that just keep in mind that trust fee income does include about $700000 in the first quarter related to.
Speaker Change: The tax prep fees that would not be.
Speaker Change: Once a year once a quarter once a year that the first quarter.
Speaker Change: Got it Chris you got it.
Speaker Change: And ladies and gentlemen, with that we'll conclude today's question and answer session I'd like to turn the floor back over to Jeff Jackson for any closing remarks.
Jeff Jackson: Thank you there is a tremendous opportunity ahead as we continue to build our future as a community focused regional financial services organization.
Jeff Jackson: Our transformational acquisition of Premier provides enhanced scale and capabilities while.
Jeff Jackson: Our organic growth engine continues to deliver strong loan and deposit growth.
Jeff Jackson: Our stronger company, which has already begun to drive improved financial metrics.
Jeff Jackson: Positions us well to continue to deliver shareholder value.
Jeff Jackson: Thank you for joining us today, and we look forward to speaking with you at one of our upcoming investor events have a great day. Thank you.
Jeff Jackson: Okay.
Jeff Jackson: And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.