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

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

Thank you. Will the meeting please come to order. I'm Christopher B. 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 Stockholders. We appreciate your attendance, your interest and most importantly, your support of WesBanco. This annual meeting of stockholders to help pursuant to the bylaws of the company written notice to all stockholders of the meeting in the virtual format in our proxy statement. You are participating in the meeting virtually, and this hopefully is our last annual meeting to have held in this matter as the COVID-19 infection rate is waned, and we would anticipate an in-person meeting next year. 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 and officers in attendance and dealing with a few procedural matters, we will take the items up to be acted upon. I would like to recognize the directors of WesBanco: Todd Clossin, Mike Crawford, Abigail Feinknopf, Denise Snyder, Jay McCamic, Eric Nelson, James Cornelsen, Robert Fitzsimmons, Bruce Knox, Gary Libs, Reed Tanner, Rosie Allen-Herring, Lisa Knutson, Gregory Proctor, Joseph Robinson and Kerry Stemler. In addition to those directors, we also have executives in attendance, obviously, Todd Clossin, our CEO; Jeff Jackson, our CFO -- our COO; and Dan Weiss, our CFO. Also attending the meeting are Tanya Wisniewski, the partner of Ernst & Young and Dan Quirk, Senior Manager of Ernst & Young, our independent auditors. Although Ernst & Young has indicated does not wish to make a statement, they are available to respond to questions during the question-and-answer sessions. In accordance with our bylaws, I will act as Chairman of the meeting, and Ms. Linda Woodfin will act as Secretary of the meeting. In addition, on January 18, 2023, the Board of Directors appointed Scott Love, Executive Vice President of Wealth Management, to serve as inspector of the Election for this meeting, and 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 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. Criss. I can confirm that stockholders of record as of March 1, 2023, were sent the notice of meeting, the proxy statement and the annual report by a mailing that commenced on March 15, 2023.

Thank you, Linda. The Secretary has the alphabetical list of stockholders of common stock of the company at the close of business on March 1, 2023. 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, would 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 1, 2023, the record date for this annual meeting, there were outstanding and entitled to vote a total of 59,247,063 shares of common stock. I've been informed by the Inspector of Election that there are 50,388,020 shares of stock represented by proxy or approximately 85% of all of 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 Inspection of the Election, I find that proper notice be given and that a quorum is present accordingly, this meeting has been properly convened. It is now 12:05 p.m. on April 19, 2023, 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 to do so via the website used to access the meeting. Please remember, if you've already voted by proxy, it is not necessary to vote again. We will allow time for those who still desire to vote, and then we will close the polls, and the Inspector of the Election will provide his preliminary report. We'll move now to review the proposals. Election of directors and approval of additional matters. Proposal 1, election of directors. The first proposal to come for 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 2026 Annual Meeting of Stockholders. The nominees are: Todd Clossin; Michael Crawford; Abigail Feinknopf; Denise Knouse-Snyder; Jay McCamic; and Eric Nelson, Jr. Each to serve for a 3-year term. Information concerning these -- their principal occupations, service on 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 in the company's bylaws. Therefore, no additional nominations may be made at this meeting, and I declare the nominations be closed. Are there any questions or comments on the first proposal?

Mr. Chairman, there are currently no questions in the queue.

Okay. Thank you, John. Seeing none, we'll move to the second proposal. Proposal 2 asks stockholders to approve an advisory resolution on the fiscal year 2022 compensation of the named executive officers, all 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's 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 or comments on this proposal?

Mr. Chairman, there are currently no questions in the queue.

Thank you. Proposal 3 asks stockholders to approve an advisory resolution on the frequency of future votes on executive compensation. This proposal is advisory pursuant to Section 14A of the Exchange Act. We are asking stockholders to vote on which future advisory votes on executive compensation of the nature reflected in the proposals item 2 above should occur every year, every 2 years or every 3 years. The corporation has had annual votes starting with the annual meeting held on April 19, 2017. Are there any questions on this proposal?

Mr. Chairman, there are currently no questions.

Thank you. The next matter to have 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, 2023. Are there any questions or comments on this proposal?

Mr. Chairman, there are no questions.

Okay. Thank you. We will now start to the deck slide provided in the program. And we would like to formally welcome Jeffrey Jackson to WesBanco. Mr. Jackson was hired as the Senior Executive Vice President and Chief Operating Officer on August 15, 2022. He joined WesBanco after a successful career with First Horizon Bank where he served as Chief Operating Officer of the regional bank as well as briefly holding regional and market president positions. During his time with WesBanco, he has visited all of our markets, gained experience and deep knowledge of our company in his role as Chief Operating Officer and has brought a number of great ideas in support of our long-term success. It is anticipated that Mr. Jackson will succeed Todd Clossin as CEO and President upon Mr. Clossin's retirement. We would also like to thank our current CEO and President, Todd Clossin, for his 10 years of dedicated service to WesBanco shareholders, customers, employees and communities. Under Mr. Clossin's leadership, WesBanco has evolved into an emerging regional financial services institution that has nearly tripled in total assets, loans and deposits through both organic growth and 5 major acquisitions. In addition to his tenure, WesBanco has earned numerous national accolades for strong customer service, solid financial performance, sound balance sheet and credit quality as well as being the employer of choice. Returning value to the shareholders. As you can see on this slide, critical long-term focus on appropriate capital allocation provide financial flexibility while continuing to enhance shareholder value through earnings growth and effective capital management. Earnings per diluted share increased from $1.34 per share in 2010 to $3.04 in 2022 and annualized dividends per share have increased over that same time, 150%. Now it's my honor to introduce and present our CEO and President, Todd Clossin. Todd?

Thanks, Chairman, Criss. I've appreciated the support of the Board, the shareholders and our employees during my tenure. This slide that I'm going to go through first, WesBanco during the last 9 years is one you've seen before, I updated by a year each -- each year that passes by. So from 2013 to 2022, we did double the number of states that we actually have banking centers in, we've got a few on production offices in a few other states, but primarily, we're in 6 states. We went from 120 to 194 financial centers, actually optimized, consolidated, closed about 50 financial centers over that 9-year time period opened a few during that time period as well, too. Our employee base, full-time equivalent employees grew by 65% up to 2,426 employees. Assets increased from $6.1 billion to $16.9 billion or 176%. Commercial and industrial loans as a percentage of total loans, which is a primary focus of ours, has gone up 48 basis points from 14.3% to 14.8%. We bought a few banks heavily concentrated in real estate that have brought that number down as we grow it organically, we tend to take it back down with each acquisition. Nonperforming assets as a percentage of total assets improved pretty significantly from 0.92%, a good number by itself, down to 0.25%, 67 basis point improvement and one of the better numbers in the industry. Our efficiency ratio is at 59.5% as of the end of last year. Net income went from $64.8 million to $183.3 million or 183% increase. Earnings per diluted share, $2.21 to $3.04 or a 38% increase. Return on average tangible equity went from 15.99% down to 13.88%. We carry a bigger capital base today relative to what we did back in 2013. And our return on average assets up from 1.06% to 1.09%. Tangible equity up 200% over that time period as well, increased the number of shareholders by 51%, and market cap went from just under $1 billion to just over $2 billion. Obviously, our stock price is down a little bit since March. The whole industry is under some pressure from interest rate increases, funding cost increases and potential economic slowdown in the future. So we release earnings next week. I can't speak to the results yet, just to tell everybody rest assured, we're still managing the bank the same way we always have. and our Board approved risk appetite statement is to take slightly less risk than peers, and we are definitely continuing to do that. On the next slide, strong credit quality. Very favorable credit quality assets when compared to all banks in that $10 billion to $25 billion peer group size. Solid credit quality is a hallmark of our company. And I think the 2 bar charts on this page really reflect that. If you can see in 2022 that the nonperforming assets as a percentage of total assets at our bank is 0.25%, as I mentioned on the prior page, peer group is at 0.37%. And net charge-offs as a percentage of average loans at the end of last year was a very miniscule 2 basis points compared to an also very good 5 basis points for the industry as a whole. On the next slide, I'll talk about our strong capital position for a minute. We do have capital ratios that are significantly above both regulatory as well as well-capitalized levels for all banks. $10 billion to $25 billion in size. This strong capital position has allowed us to effectively manage our capital strategy, including dividends, share repurchases over time as well as acquisitions. Our dividend yield as of the end of last year was 3.7% compared to 2.9% for the bank group. And we did purchase 3.4 million shares of our stock in the open market through about October of last year. Tier 1 risk-based capital ratio, you can see that we have a 12.33% relative to peers, 12.64%, relatively close to peers and obviously well above double the required level and 50% higher than the well-capitalized level. Tier 1 leverage capital, we have a 9.9% ratio and peer is 9.91%, also a very robust number. I'd now like to turn it over to Jeff Jackson, who was introduced by our Chairman, and let him talk a little bit about how well we're positioned for the future. Jeff, why don't you go ahead?

Thanks, Todd. Good afternoon. I'm really excited to be here with you today. WesBanco is well positioned for long-term success. We have a distinct long-term growth strategies with unique advantages to propel us going forward. It starts with having a balanced distribution across our footprint with a strong presence in economically diverse major markets. Combining that with a diversified earnings stream led by our Century Old Trust and Wealth Management business. This strategy has delivered strong results and also maintained a robust legacy deposit base, which provides a great competitive advantage for us. In late 2021, we upgraded our core banking software. This allowed us to enhance our digital products, strengthen our security measures and provide powerful financial management tools to our customers. This system upgrade has also improved our customer service by reducing manual activities and making us more efficient, thus creating positive operating leverage. The new system has also put us in a great position for an acquisition should the right opportunity arise. We continue to place a strong emphasis on our digital capabilities and customer service to ensure we meet the needs of our customers efficiently and effectively. WesBanco has developed online capabilities for small business, residential mortgage loan applications, deposit account opening and insurance. We continue to receive awards and accolades based on our customer satisfaction and feedback. We were once again named as one of the best banks in America by Forbes, along with just recently being named one of the best banks in the world. As we move to the future, we are continuing to diversify our earnings streams. We're investing in loan production office strategy and looking to expand beyond Cleveland, Nashville and Indianapolis, all 3 of which are really delivering the results we've been looking for. We're also enhancing our treasury management capabilities from a product and sales perspective to serve our customers better and drive additional revenue. Late last year, we provided swap trading for over 100 commercial bankers and expect our swap revenue to double from last year. And finally, we continue to drive an inclusive culture that attracts top talent in all of our markets. Last year, we hired 30 new commercial lenders and have similar plans for this year. Over the last 8 months, it's been a pleasure working with Todd, Criss and the rest of the Board of Directors, and I really look forward to succeeding Todd and continuing to grow our company in the future. Thanks.

Thanks, Jeff. I'm glad to have you on the team. Willing to answer any questions that might be out there.

Mr. Clossin, there are currently no questions .

Okay. Chairman, Criss, I'll turn it back to you.

Thank you, Todd. Thank you, Jeff. The polls are about to close. So if you have not voted, please do so. [Voting]

So everyone has had the opportunity to vote. It is now 12:20 and the polls are closed. The Inspector of Election has delivered his preliminary report and I now ask him 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 85% of the votes cast in favor of his or her election and has been elected as Director of the company to serve their respective terms. The resolution on an advisory basis for the compensation of our named executive officers received more than 95% of the votes cast in favor of the proposal and has been approved. The resolution on an advisory basis on the frequency of future advisory votes on executive compensation received more than 86% of the votes cast in favor of the yearly option consistent with the Board's recommendation and past practices. And finally, the ratification of the appointment of Ernst & Young as the company's independent registered public accounting firm received more than 97% of the votes in favor, and the appointment has been ratified. We'll file the final report of the Inspector of Election with the records of this meeting, and 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. That 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.