WesBanco, Inc. (WSBC) Earnings Call Transcript & Summary

Hello and welcome to the Annual Meeting of Stockholders of WesBanco, Inc. Please note today's call is being recorded -- today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Christopher Criss, Chairman of the Board of Directors of WesBanco, Inc. Mr. Criss, the floor is yours.

Thank you. Will the meeting please come to order? My name is Christopher Criss, and I'm the Chairman of the Board of WesBanco, Inc., and I will be presiding at this meeting. Along with my fellow directors and executive officers of the company, I would like to welcome you to our Annual Meeting of Stockholders. We appreciate your attendance, your interest and, most importantly, your support of WesBanco. This annual meeting of stockholders is held pursuant to the bylaws of the company, written notice to all stockholders and supplemental notice of the meeting format change [ was done ] via press release and amendment to our proxy statement. You are participating in the meeting virtually. The pandemic has required us to hold the meeting in this manner in the interest of public health concerns and out of abundance of caution. Stockholders may submit questions at any time during this meeting in the space provided on the virtual meeting screen. During the annual meeting, questions from stockholders should pertain to the proposals being considered at that particular time. Stockholders wishing to ask other questions will be given an opportunity to do so during a separate question-and-answer session. After introducing directors in attendance and dealing with a few procedural matters, we will take items up to be acted on. Directors of WesBanco are Stephen Callen, Todd Clossin, James Cornelsen, Michael Crawford, Abigail Feinknopf, Robert Fitzsimmons, Bruce Knox, Lisa Knutson, Gary Libs, Jay McCamic, Eric Nelson, Ron Owen, Gregory Steve Proctor, Joe Robinson, Denise Snyder, Kerry Stemler, Reed Tanner and Charlotte Zuschlag. The WesBanco executives in attendance are Todd Clossin and Robert Young. Also attending this meeting is Alex Schmitt, Partner of Ernst & Young; as well as Dan Quirk, Senior Manager for the WesBanco account for Ernst & Young. They are our independent auditors. Although Ernst & Young has indicated they don't wish to make a statement, Mr. Schmitt and Mr. Quirk are available to respond to appropriate questions during the question-and-answer session. In accordance with our bylaws, I will act as Chairman of the meeting, and Mrs. Linda Woodfin will act as secretary of the meeting. In addition, on January 15, 2020, the Board of Directors appointed Jonathan Dargusch, Executive Vice President of Wealth Management, to serve as the inspector of the election for this meeting. I request that he file his oath of office with the secretary of the meeting for inclusion in the minutes of the meeting. The Board also appointed Robert Young, Senior Executive Vice President of WesBanco as clerk to the inspector. Will the secretary please read the report of notice of meeting?

Thank you, Mr. Chairman. I can confirm that stockholders of record as of March 3, 2020, were sent the notice of meeting, the proxy statement and the annual report via mailing that commenced on March 18. I can also confirm the filing of an amendment to the proxy statement changing the location and format of our meeting and the issuance of the corresponding press release on March 31, 2020.

Thank you, Linda. The secretary has the alphabetical list of stockholders of the common stock of the company at the close of business on March 3, 2020. This list of stockholders has been available for examination of the company for any purpose relevant to this meeting during ordinary business hours since the mailing of the proxy materials. This list is also available for inspection during this meeting by any stockholder on the website used to access this meeting. Please follow the prompts noted on the website and your control number on your proxy card that will allow you to view the list. Mr. Young, will you please present your report of attendance at this meeting so we can determine whether a quorum is present?

Thank you, Mr. Chairman. On March 3, 2020, the record date for this annual meeting, there were outstanding and entitled to vote a total of 67,223,891 shares of common stock outstanding. I have been informed by the inspector of elections that there are 58,637,633 shares of stock represented by proxy or approximately 86.45% of all the shares entitled to vote at this annual meeting. The shares so represented exceed 50% of the total shares entitled to vote at this meeting and, thus, constitute a quorum.

Thank you, Mr. Young. On the basis of the report of the secretary and the clerk to the inspector of election, I find that proper notice has been given and that a quorum is present. Accordingly, this meeting has been properly convened. It is now 12:05 on April 22, 2020, and the polls for voting on all matters are open. All WesBanco stockholders entitled to vote at this meeting have the ability to do so online. If you are a stockholder entitled to vote and have not yet voted or if you want to change your previously cast vote, please do so via the website used to access this meeting. Please remember that if you've already voted by proxy, it is not necessary to vote again. We will allow time for those still desiring to vote, and then we will close the polls, and the inspector of election will provide his preliminary report. We will now review the proposals: election of directors and our approval of additional matters. Proposal 1, election of directors. The first proposal to come before the meeting is the election of directors. At this meeting, we will be electing 8 directors, 6 for a 3-year term expiring at the 2023 Annual Meeting of Stockholders; one to serve a 1-year term expiring in 2021; and one to serve a 2-year term expiring in 2022. The nominees are Todd Clossin, Abigail Feinknopf, Denise Snyder, Jay McCamic, Eric Nelson and Michael Crawford for the 3-year terms; James Cornelsen for a 1-year term; and Gregory Steve Proctor, Jr. for a 2-year term. Information concerning their principal occupations, service as WesBanco Board members, skills and qualifications and other matters which may be of interest are contained in the proxy statement. No other nominations were received prior to the deadline established by the company's bylaws. Therefore, no additional nominations may be made at this meeting, and I declare nominations to be closed. Are there any questions or comments on the first proposal?

[Operator Instructions]

Mr. Chairman, we have no questions submitted.

Thank you. Seeing that, we'll move on to the second proposal. Second, proposal 2, the advisory vote on executive compensation. Proposal 2 asks stockholders to approve on an advisory resolution the fiscal year 2019 compensation of the named executive officers as discussed in our proxy statement. This proposal is advisory. Although nonbinding, the vote will provide information to our compensation committee and our Board of Directors regarding investor sentiment about our executive compensation philosophy, policies and practices, which our compensation committee and our Board of Directors will be able to consider in making future executive compensation decisions. Are there any questions or comments on proposal 2?

Mr. Chairman, there are no submitted questions.

Thank you. We'll move on to proposal 3, ratification of appointment of independent registered public accounting firm. The next matter to come before this meeting is the ratification and appointment of Ernst & Young as the company's independent registered public accounting firm. The Board of Directors recommends the ratification and the appointment of Ernst & Young to serve as the company's independent registered accounting firm and to audit the company's financial statements for the fiscal year ending December 31, 2020. Are there any questions on this proposal?

Mr. Chairman, there are no submitted questions.

Thank you very much. Now we will move on to the slide presentation included in the pack. The first slide that I'd like to go over involves the merger with Old Line Bancshares that was completed on November 22, 2019. Included in our present slide are 2 directors who agreed to serve on WesBanco's Board and who actually are in the slate to be elected today. They're the former Chief Executive Officer of Old Line Bank, James Cornelsen; and the former Vice Chairman of Old Line Bank, Gregory Steve Proctor. As many of you know, to the next slide, this year represents WesBanco's 150th anniversary. Our original charter was issued January 20, 1870, to the German bank, which essentially began operations on April 3, 1870. As you can see from that time line, the growth the company has enjoyed over the 150 years and in particularly, the last 15 years of growth in the states that we now do business in. As we move to returning value to shareholders, critical long-term focus on appropriate capital allocation provide financial flexibility while continuing to enhance shareholder value through earnings growth and effective capital management. We've been able to grow earnings per share over the last 9 years, 128%. And along with that annualized dividends, which is close to the shareholders' heart, it's also grown a like amount at 129%. Now I would like to introduce the President and Chief Executive Officer of WesBanco, Inc., Todd Clossin.

Thanks, Chris. I appreciate that. And I hope everyone on the phone, you and your families are remaining healthy and safe during this unusual time period. As Chris just stated the growth of the organization, I thought I would start out by talking about a few reasons why that was important and why that's really benefiting us today. The scale of technology is continuing to grow. And with our heft in size at this point, we're able to continue a really good spend on technology. Our product and geographic diversification is now greater than it's ever been in terms of the number of products in the number of different cities and states that we operate in, and also the continued solid credit quality and risk management practices of the company. So when you look at the slide that we've got in front of us, in 2013 versus 2019, we went from 3 to 6 states. We went from 120 to 236 financial centers. We went from 1,469 employees to 2,705. Asset size, we grew from $6.1 billion to $15.7 billion. Commercial and industrial loans as a percentage of total loans, which was an initiative of ours, has moved from 14% to 16% during that time period. And nonperforming assets as a percentage of total assets has improved from 0.92% to 0.35%. Efficiency ratio has improved from 61% to 56.7%. And as you heard, earnings per share have grown from $2.21 to $3.06 for 2019. Return on average tangible equity, 15.99% in 2013 is now 15.1% as of the end of the year. We've been growing equity very significantly, so that impacts that ratio. Growing equity is a good thing. Return on average assets went from 1.06% to 1.34%, remains best-in-class or just about best-in-class with our peer group. Number of shareholders registered went from 4,750 to just over 8,000, and the market capitalization of the company went from just under $1 billion to just a little bit over $2.5 billion as of the end of last year. That 6-year performance, I would say, is not matched by many peer banks. I want to thank all the employees for their hard work and the Board for their support over this time period. Now we face the hard work of moving through the pandemic, and I'm going to talk a little bit about that and what your bank is doing with regard to that. First of all, on the next slide, with regard to operational preparedness. We established cross-functional teams in order to monitor the pandemic and determine the necessary communication and actions. We actually put that in place the last week of March. So we took some very early action on this. That cross-functional task force is made up of a number of different corporate departments as well as market leaders from across the organization. The focus is on the safety and the potential impact on our bank, its employees, its vendors, customers and its communities. That group has continued to meet 3 days a week, Monday, Wednesday and Friday. We actually have a meeting later this afternoon. We are very proactive with credit risk management through our internally driven loan reclassification methodology that we undertook during the third and fourth quarters of last year. The timing on that turned out to be very, very good. And the fact that you have the opportunity to go through your entire portfolio or a significant portion of it and be able to reevaluate that on more of a quantitative measure versus just qualitative measures. And I think that sets us up pretty well for whatever type of economic situation we come into over the next several quarters. We also did a large-scale test in our telecommunicating and remote access capabilities. We tested that again in early March. We went live with that in mid-March. So our employees have been working remotely, a great majority of them, for the last 5 to 6 weeks. And we continue to be proactive with continuous communications to the employees. I send out e-mails every week to them, keeping them informed of what's going on at the bank and trying to make sure that we keep morale high. The next slide, with regard to employees, again, we're utilizing telecommunicating and also relaxing our paid time-off policies to make it easier for employees to be able to be at home. We're temporarily limiting most financial center locations to drive-up and ATM services only. Again, we did this back in the middle part of March. We were one of the first banks in many of our footprints to do that. A lot of people raised their eyebrows at the time in terms of why we were doing that, but that turned out to be a very astute move on the part of the management team because we were able to keep our employees safe and have had relatively minor impacts with regard to employee health to this point. We required all in-house meetings to be conducted via teleconference or video conference. Our systems were scalable, and we were prepared to handle this volume and have done it quite well. We implemented guidelines regarding personal travel and early self-quarantine steps based upon that travel. And again, this has been in place now for 5 or 6 weeks. We also suspended all nonessential business travel back in early March and enhanced our enterprise-wide cleaning efforts back in early March as well, too. On the next slide, with regard to customers, we're assisting all customers through our online as well as our mobile tools and our call center. We have the ability to open accounts online, checking accounts, savings accounts, apply for mortgages, apply for small business loads online, and we had all these in place over the last couple of years. So very well positioned to be able to handle the accelerated need for this during the pandemic time period. We provide support for our residential mortgage and our consumer loan customers. We had a borrower relief program that we published right away, that gave a phone number for existing residential mortgage and consumer and small business customers regarding the opportunity to defer loan payments. We also suspended the initiation of any new residential foreclosure or repossession actions during the time of the crisis. We also provided support for our commercial customers in terms of deferral of certain loan payments, principal and, in some cases, interest as well, too, for up to 90 days for those that are most seriously impacted. To date, we've actually deferred payments on more than 2,500 business and consumer loans. We also provided working capital facilities for the public accommodation businesses. We've also been very active participant in the CARES Act. We actually have had more than 2,300 loans for a little bit over $560 million go through that program, and we're looking forward to being active in the next phase of that program, should the house approve it later this week. On the next slide, with regard to communities, the WesBanco Bank Community Development Corporation has pledged $350,000 in grants to fund certain nonprofit organizations that are providing relief for those that responds to the COVID-19 pandemic. And again, those are within our footprint. I'm also very pleased to see that our employees were excited about us taking the dollars we had budgeted for our 150th anniversary celebration, about $200,000 remained in that budget, and applying that also to the $350,000 in terms of community development support for nonprofit organizations impacted by the COVID-19 pandemic. I think our founders would be proud of the fact that we'd have over $0.5 million being given out across our footprint to nonprofits in need. On the next slide, with regard to credit quality. We have very favorable asset credit quality measures. And we're now in a peer group who are valuating from $5 billion to $25 billion in size. Nonperforming assets as a percentage of total assets, you can see the downward sloping chart there in 2019. That was a 0.35% number for us relative to our peer group of 0.49%. And I think that positions us well heading into, again, a downturn that we're all going to be facing. Net charge-offs to average loans, similar story. 9 basis points was what we experienced in 2019, and the peer group was at 15 basis points. The next slide is our strong capital position. Our regulatory capital ratios are significantly above regulatory requirements and well-capitalized levels. And you can see the total risk-based capital ratio there at 15.12%, well above the well-capitalized level of 10% and the required level of 8%. Intangible equity to tangible assets, very strong ratio at 10.02% and great position there. So very, very good, very, very solid numbers. Couldn't be in a better place from a capital perspective, a credit quality perspective, heading into a recession. I thought I'd finish up by talking about our recent successes and our accolades. The Western Pennsylvania market of our bank was awarded the Top Workplace honor by the Pittsburgh Post-Gazette for the second consecutive year. Our Central Ohio market was named a Top Workplaces by Columbus CEO magazine for the fourth consecutive year. WesBanco Bank received the Americas Saves Designation of Savings Excellence. Bauer Financial again awarded us the highest rating as a 5-star bank. The FDIC awarded us our seventh consecutive composite outstanding CRA rating. And based 100% on customer feedback, WesBanco was named to the inaugural Forbes list of the World's Best Banks as the #7 best bank in America. And for the tenth time since the list's inception in 2010, our bank was named to the Forbes list of the best banks in America, coming in as the seventh best bank. So again, our customers are saying great things about us. And financially, we seem to rank very, very high among the best banks in the nation. I'd now like to turn over to the operator for any questions.

[Operator Instructions]

Mr. Chairman, Mr. Clossin, we have no questions submitted.

Okay. Thank you. It's now approximately 12:24, and we will close the polls now. The polls are about to close. If you've not voted yet, please do so. And I think since everybody has had the opportunity to vote, the polls are now closed. And the inspection -- inspector of election can deliver his preliminary report and announce the preliminary results. Mr. Young?

Thank you, Mr. Criss. This comes from the advanced proxies that were submitted. We'll see if there were any other late ballots submitted through Computershare, and we'll report all of those votes on an 8-K here this evening. Based on the inspector of election's preliminary report, each of the nominees for director received more than 93.3% of the votes cast in favor of his or her election and has, therefore, been elected as a director of the company to serve for their respective terms. The resolution on an advisory basis for the compensation of our named executive officers for fiscal 2019 received more than 93.6% of the votes cast in favor of the proposal and has, therefore, also been approved. And finally, the ratification of the appointment of Ernst & Young as the company's independent registered public accounting firm received more than 97.8% of the votes in favor, and the appointment has therefore been ratified. We will file the final report of the inspector of election with the records of this meeting. We do expect to report the results of the voting, as I said earlier, on an 8-K later today. Thank you.

Thank you, Mr. Young. I would also like to thank the participation of the former Old Line Bank shareholders in our shareholder meeting today. This concludes the business for the meeting. The meeting is now adjourned. Ladies and gentlemen, thank you for attending today's meeting.

This concludes the meeting. You may now disconnect.