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

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

Thank you. Welcome to the meeting. Please come -- will the meeting please come to order. I'm Christopher Criss, 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 the 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 out to all stockholders of the meeting in the virtual format and our proxy statement. You are participating in the meeting virtually. Stockholders may submit questions at any time during this meeting in a space provided by 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 questions and other questions will be given an opportunity to do so during a separate question-and-answer session following our presentation. After introducing the directors, I will deal with a few procedural matters, we'll take up items to be acted upon. I would like to recognize the following directors of WesBanco; Stephen Callen, Todd Clossin, James Cornelsen, Michael Crawford, Abigail Feinknopf, Robert Fitzsimmons, Bruce Knox, Lisa Knutson, Gary Libs, Jay T. McCamic, Eric Nelson, Gregory Proctor, Joseph Robinson, Denise Snyder, Kerry Stemler, Reed Tanner as well as Director Nominee Rosie Allen-Herring. Also attending the meeting today is Tanya Wisniewski, partner of Ernst & Young LLP, our independent auditors. Although Ernst & Young has indicated they do not wish to make a statement, Tanya is available to respond to appropriate questions during the Q&A session. In accordance with our bylaws, I will act as Chairman of the meeting and this is Linda Woodfin, who acts as Secretary of the meeting. In addition, on February 24, 2022, 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 files his oath of office with the secretary for the meeting for inclusion in the minutes of the meeting. The Board has also appointed Daniel Weiss, Jr., executive Vice President and CFO as clerk to the inspector. Will the Secretary please report on the notice of the meeting?

Yes. Thank you, Mr. Chairman. I can confirm that stockholders of record as of March 2, 2022, were sent the notice of meeting, the proxy statement and the annual report by mailing that commenced on March 16, 2022.

Thank you, Linda. The Secretary has an alphabetical list of the stockholders of common stock of the company at the close of business on March 2, 2022. 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 will allow you to view the list. Mr. Weiss, 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 2, 2022, the record date for this annual meeting, there were outstanding and entitled to vote a total of 60,983,930 shares of common stock. I've been informed by the Inspector of Election that there are 50,800,505 shares of stock represented by proxy or approximately 83.3% 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. Weiss. On the basis of the report of the Secretary and the clerk to the inspector of the 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 20, 2022, and the polls for voting on all matters are now 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 using to access this meeting. Please remember that if you have already voted by proxy, it's not necessary to vote again. We will allow time for this -- 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 move on to a review of proposals. The first proposal to come before the meeting is the election of directors. At this meeting, we will be electing 6 directors to serve for a 3-year term expiring at the 2025 Annual Meeting of Stockholders. The nominees are Rosie Allen-Herring; myself, Christopher Criss; Lisa Knutson; Gregory Proctor; Joe Robinson and Kerry Stemler each to serve for a 3-year term. Information concerning their principal occupations, service as a WesBanco Board member, skills and qualifications and other matters which may be of interest are contained in the proxy statement. No other nominations we received prior to the deadline established in the company's bylaws. Therefore, no additional nominees may be made at this meeting, and I declare the nominations to be closed. Are there any questions or comments on the first proposal? Seeing none, we'll move on to the second proposal. Proposal 2, as stockholders provide an advisory resolution on the fiscal year 2021 compensation for the named executive officers, all as described 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 when making future executive compensation decisions. Are there any questions on the second proposal?

Mr. Chairman, there are no questions.

Thank you. We'll move to the third proposal. The next matter to come before the meeting is the ratification of the appointment of Ernst & Young as the company's independent registered public accounting firm. The Board of Directors recommends the ratification of the appointment of Ernst & Young to serve as the company's independent registered public accounting firm and to audit the company's financial statements for the fiscal year ending December 31, 2022. Are there any questions or comments on this proposal?

Mr. Chairman, there are no questions.

Thank you. I would like to acknowledge Stephen J. Callen at this time who is retiring from the Board of Directors. He has served as a Director of WesBanco since April 20, 2016, and during that time, was a member of the Audit Committee. Mr. Callen brought more than 45 years of experience in business and finance and added valuable expertise to the Board. We thank him for his years of counsel and dedicated service to WesBanco. I would also like to note the nomination of a new director to WesBanco's Board of Directors for a 3-year term. Her name is Rosie Allen-Herring. Since 2013, she has served as President and Chief Executive Officer of the United Way of the National Capital Area, Washington, D.C. She was formerly a Director at Old Line Bank, which was acquired by WesBanco and currently serves as a member of our Mid-Atlantic Advisory Board for WesBanco Bank Inc. She brings a wealth of experience, demonstrated leadership and management of large organizations as well as a background in corporate finance and equity investments, which make her eminently qualified to serve on the Board. I'd like to make a comment on returning value to shareholders. Critical long-term focus on appropriate capital allocation provides financial flexibility while continuing to enhance shareholder value through earnings growth and effective capital management. As you can see on the chart, earnings per diluted share have increased from $1.34 a share in 2010 to $3.62 a share for 2021. And along with that increase, the dividends have increased from $0.56 a share to $1.36 a share estimated for 2022. I would now like to introduce Todd Clossin, President and Chief Executive Officer of Corporation for a short presentation. Mr. Clossin?

Thank you, Chairman, Criss. If I can go to Slide 6 in the presentation. I'd like to review our last 8 years from 2013 to 2021. During that time period, we've gone from 3 states to operating in 6 states. We've gone from 120 financial centers to 206 financial centers. We've grown our employee base from 1,469 employees to 2,462 employees. Our asset size has grown from $6.1 billion to $16.9 billion. The commercial and industrial loans as a percentage of total loans has grown from 14.3% to 14.9%. Nonperforming assets as a percentage of total assets has been reduced by -- from 0.92% down to 2 -- I'm sorry, down to 0.23%. Our efficiency ratio has improved from 61% to 58.2%, and our net income has nearly tripled from $64.8 million to $237.4 million. That relates to a diluted earnings per share of $2.21 to $3.62 in 2021. You can see our return on average equity that is listed there that is influenced by our capital raise that was done in August of 2021. You can also see our return on average assets. You can see our tangible equity is up 2.5x as well, too. The number of shareholders registered is up 58% and our market capitalization over the last 8 years has gone from $930 million to $2.18 billion. So very strong numbers. I do want to highlight that the 2021 profitability was heavily influenced by the CECL-related reserve release. So 2022, the year we're in maybe a better read on profitability comparison to prior years. So I did want to make that comment. Turning to the next page on recent key accomplishments. One of our major accomplishments last year was the completion of the conversion of our core banking software. That was the first core conversion that we've had, I believe, in 45 years. Congratulations to the employees and all the hard work for putting that in place. What that allows us to do is enhance our digital products and services, including Zelle, which we introduced last year. It also gives us enhanced security measures and a number of other features as well, too. One of the big pluses from this is it gives us real-time account activity across all channels, which is kind of table stakes in the financial services industry today. So we're glad to be able to bring it up to our customers. We've also improved customer service through reduced manual activities. It means a reduce in manual errors as well. And it's also a more efficient processing system for us from a cost structure perspective and is also scalable for our future growth. Strong digital utilization by customers has also shown over the last year, I think that was highlighted with the acceleration of the digital advancements due to the pandemic and a lot of the work remote and employees and customers accessing their accounts remotely was really accelerated. We now have 70% of our retail customers utilizing our online digital banking services. 4.1 million web and mobile audience per month. And now we have 50% of our residential mortgage applications are being done versus -- via our online portal. We also implemented our loan production office, which I had mentioned in some prior earnings calls, our LPO strategy, so to speak. We funded this partially through branch optimization plans that have been in place over the last couple of years. We did recently open LPOs in Northern Virginia and the Nashville area, and we announced earlier this week the opening of a loan production office in Indianapolis, all 3 great cities and cities we're looking forward to a lot of growth in. We did a successful sub-debt offering of Tier 2 capital last month, $150 million at a 3.75% fixed to floating rate subordinated notes due in 2032. That was a well-timed offering. Rates are up about 80 basis points. The 10-year treasury is up by 80 basis points since that time. So the net effect of doing that when we did is going to benefit us for many, many years to come. To the next page. Strong credit quality has always been a core tenant of our company, and it's clearly something that we focus on is attention to credit quality. If you look at our nonperforming assets as a percentage of total assets, just 23 basis points versus a peer group of 44 basis points in our charge-offs as a percentage of average loans, just 2 basis points, and our peer group was at 8 basis points. The next page, we'll talk about our strong capital position. It's allowed us to return capital to shareholders through both dividends and share repurchases. During 2021, we purchased 5.2 million shares of WesBanco common stock on the open market, representing 7.7% of shares outstanding. On February 24 of this year, the Board approved the capacity to purchase up to an additional 3.2 million shares, representing 5.4% of shares outstanding. You can see from the 2 graphs that are there, our Tier 1 risk-based capital ratio at 14.05% is well above the well-capitalized requirement of 8% and our Tier 1 leverage capital ratio of 10.02% is double the well-capitalized requirements of 5% by regulatory agencies. Our capital ratios were enhanced in 2020 -- August 2020 by the issuance of $100 million in preferred stock and effective in the fourth quarter of 2019 as required by the Dodd-Frank Act for financial institutions with total assets above $15 billion. Our Tier 1 capital ratios were negatively impacted by the movement of $130 million of TruPS from Tier 1 to Tier 2 base capital. You can see that reflected in our numbers. So we feel very good about our capital position. Go to the next page, recent successes and accolades. We were pleased to be recognized as one of America's most trustworthy companies by Newsweek as well as being 1 of only 20 banks to earn this nationwide honor. We were also named one of America's best midsize employers by Forbes based upon employee feedback and recommendations. We're the only mid-sized bank in the country in the top 10 for both financial performance and employer of choice. We were also once again named 1 of the 10 best banks in America by Forbes coming in as the tenth bank. This was the third year in a row that we were in the top 12. For the second consecutive year, we were named the Newsweek Magazine's ranking of America's Best Banks, recognizing those banks that best serve their customer needs as well as being named the best big bank in the state of West Virginia. Based 100% on customer satisfaction and consumer feedback, WesBanco Bank was named for the third year in a row, one of the world's best banks by an independent ranking, the leading financial magazine. The next page, continue to talk about successes and accolades. WesBanco Bank Community Development Corporation received a 2021 Community Commitment Award from the American Bankers Association Foundation for the strong performance and outreach of our New Markets Loan Program. We also received the Americas Saves Designation of savings excellence for banks. Bauer Financial again gave us a 5-star rating. The Central Ohio market, again, for the sixth year in a row was voted as a top workplace by Columbus CEO Magazine. And the FDIC awarded WesBanco Bank its seventh consecutive composite outstanding rating for our most recent CRA performance. So very good overall marks from our customers, our employees, and from the financial community. So we feel very good about how we performed. Looking forward to 2022. At a higher interest rate environment, we expect to have more normalized growth in the markets in a more normalized credit climate than the last couple of years. Inflation has increased the odds of a potential economic slowdown at some point over the next couple of years. We'll be well prepared for any environment that comes forward. We feel we're well positioned for the future. I'd like to conclude my comments with just a thank you to the Board and to the shareholders for their continued support of our company, and I'd like to open it up for any questions that there might be.

Thank you. Mr. Chairman, Mr. Clossin, there are no current questions in the queue.

Thank you, John. Thank you, Todd. The polls are about to close. If you have not yet voted, please do so. Since everyone has had the opportunity to vote, is now 12:21 and the polls are now closed. The inspector of the election has delivered his preliminary report, and I will ask him now to announce the preliminary results. Mr. Weiss?

Thank you, Mr. Chairman. Based on the Inspector of Election's preliminary report, each of the nominees for director received more than 95% of the votes cast in favor of his or her election and has been elected as a director of the company to serve for their respective terms. Regarding the second proposal, the resolution on an advisory vote for the compensation of our named executive officers for the fiscal year 2021, received more than 95% of the votes cast in favor of the proposal and has been approved. Finally, the ratification of the appointment of Ernst & Young as the company's independent registered public accounting firm received more than 96% of the votes in favor, and the appointment has been ratified. And we will file the final report of the Inspector of Election with the records of this meeting. And furthermore, we expect to report the results of the voting on a Form 8-K to be filed with the SEC within 4 business days of this meeting.

Thank you, Mr. Weiss. I'd like to congratulate the directors who are elected today for a new 3-year term. This concludes the business for the meeting. The meeting is now adjourned. Ladies and gentlemen, thank you for your support of WesBanco and for attending today's meeting. Have a good day.

This concludes the meeting. You may now disconnect.