WesBanco, Inc. (WSBC) Earnings

Management highlights

### Core Financial & Loan Growth Highlights - The quarter delivered strong sequential and year-over-year loan growth, record commercial loan production and pipeline, and profitable growth via positive operating leverage and disciplined execution, aligned with the bank's relationship-focused banking model. - Total loan growth hit 3.5% year-over-year and 8.3% annualized sequentially; C&I lending grew 5% year-over-year and nearly 25% annualized quarter-over-quarter. Record year-to-date commercial loan production reached $2.5 billion, $1 billion higher than the first half of 2025. - Elevated CRE payoffs created a 1% year-over-year growth headwind, with $345 million in Q2 2026 payoffs bringing 12-month total payoffs to over $1.3 billion. Adjusting for this headwind, total loans grew 4.5% year-over-year. - At quarter-end, the commercial loan pipeline reached a record $2.3 billion, up 40% quarter-over-quarter and 90% from year-end 2025, with early retention holding the pipeline steady post-quarter. ### Expansion Strategy Updates - The bank advanced its southeastern US expansion strategy, opening a new loan production office in Naples, Florida following earlier launches in Palm Beach and Broward counties. After just 3 months of operation, Florida teams already contribute ~10% of the total commercial pipeline, with $200 million in current loans outstanding. Management projects the Florida franchise could reach $2 billion in loans within a couple of years. - Financial centers in Fort Lauderdale and West Palm Beach are on track to open in H1 2027, with locations secured and FDIC approval received. Long-term expansion into additional Florida markets (Tampa, Orlando, etc.) is possible after the current build-out matures. - A strengthened loan production office in Nashville is now operational, with an existing pipeline of ~$150 million expected to contribute to growth in H2 2026. ### Deposit & Credit Quality Highlights - Transaction account growth offset declines in higher-cost CDs to deliver net deposit growth; deposit attrition from the 2026 closure of 37 financial centers was meaningfully below conservative management assumptions, with only $75 million in sequential deposit decline. - Credit quality remains stable by historical standards, with charge-offs of just 2 basis points. The allowance for credit losses totaled $218 million (1.12% of total loans), with the quarterly increase driven primarily by higher loan balances. ### Fee Income Highlights - Non-interest income hit a record level in Q2, driven by higher swap income, deposit service charges, and non-recurring gains (a $4.8 million pension plan gain and $1.6 million gain from sold closed branch properties). Trust and securities brokerage assets also reached a record $11 billion.

Guidance

- Full-year 2026 loan growth is still projected to hit mid-single-digits, with growth expected to accelerate in the second half of the year even as CRE payoffs taper to roughly two-thirds of Q2 levels in Q3 2026. - Management anticipates one Federal Reserve rate hike in Q4 2026, with no material impact to 2026 full-year results. - Net interest margin (NIM) is projected to remain stable around the 3.60% level seen in Q2 for the remainder of 2026. Asset repricing tailwinds (from maturing lower-yielding securities and loans) will offset slightly higher funding costs from temporary wholesale borrowing to fund accelerating loan growth. Faster-than-expected deposit growth would provide upside to NIM. - Deposit funding costs are expected to have already hit a floor, as CD repricing benefits are fully reflected in the current deposit book. Historical seasonal trends indicate $600 million to $700 million in deposit growth is expected in H2 2026, in line with the prior three-year average. - Quarterly fee income is still projected to grow 3% to 5% year-over-year in H2 2026. Gross commercial swap fee income for full-year 2026 is projected to reach $8 million to $10 million, with meaningful contribution from new Florida markets. - Adjusted quarterly non-interest expense for Q3 and Q4 2026 is projected to reach a run rate of $153 million, which incorporates full costs for South Florida expansion, mid-year merit increases, and planned $5 million per quarter marketing investment. Occupancy expenses will decline year-over-year from branch optimization, offset slightly by expansion-related costs. - The full-year 2026 effective tax rate is projected to be approximately 21%. - The CET1 capital ratio is expected to remain stable around 10.7% for the remainder of 2026, within the bank's 10.5% to 11% target range.

Segment performance

West Banco is a commercial and retail banking firm, with all performance reported on a consolidated firm-wide basis. Key total segment results for Q2 2026: GAAP net income available to common shareholders was $88 million ($0.91 per diluted share); adjusted net income (excluding merger and restructuring charges) was $89 million ($0.92 per diluted share). Year-to-date 2026 adjusted EPS increased 14% year-over-year to $1.83. Total assets reached $27.8 billion, with total portfolio loans of $19.5 billion (up 3.5% year-over-year, representing 70.1% of total assets) and securities of $4.4 billion (representing 16% of total assets). Deposits increased 2.1% year-over-year to $21.6 billion. Non-interest income for Q2 2026 was $54 million, up 22% year-over-year. Adjusted non-interest expense (excluding restructuring/merger costs) for Q2 2026 was $148 million, up 1.8% year-over-year. Return on average assets was 1.3%, return on tangible common equity was 17.3%, and the efficiency ratio hit a record low 51%. The CET1 capital ratio was 10.7%, within the bank's 10.5%-11% target range.

Risks & headwinds

- Faster-than-expected loan growth paired with lower-than-projected deposit growth would require increased higher-cost wholesale funding, creating downside pressure on net interest margin. - Elevated CRE payoffs, while expected to taper, could remain higher than projected in the second half of 2026, potentially slowing net loan growth even with a strong production pipeline. - Competition for loans and deposits remains intense, and any unexpected intensification of competition could pressure growth rates and margins. - Future provision for credit losses is dependent on shifts in macroeconomic forecasts, changes in credit quality metrics, and unanticipated loan charge-offs. - Future fee income performance is tied to equity and fixed income market trends, which can be volatile.

Analyst Q&A

• Q: Analysts asked for visibility into second half 2026 deposit growth, and for color on the uptick in classified criticized loans. /

  A: Management stated historical trends point to $600-$700 million in H2 deposit growth, aligned with the prior three-year average, supported by new retail and commercial deposit promotion programs. The uptick in classified criticized loans was attributed to quarterly credit regrading and timing; the metric has already fallen 11 basis points post-quarter-end, and management expects it to drop to the low 3% range by the end of Q3. The three criticized MPL loans added last quarter are fully reserved, and management expects all three to be resolved by early Q4.

• Q: An analyst asked if management can defend the 3.60% NIM through end-2026, and how the margin trend will shift into 2027. /

  A: Management confirmed they expect to maintain the 3.60% NIM, supported by substantial asset repricing tailwinds: ~$250 million per quarter in maturing securities will be reinvested at ~180 basis points higher yield, and $450 million in lower-yielding fixed-rate commercial loans maturing in the next 12 months will reprice at ~200 basis points higher. Deposit costs have hit a floor, so only modestly higher funding costs from temporary wholesale borrowing will offset the repricing tailwinds. The projected Q4 2026 rate hike is even expected to add a few basis points of NIM upside entering 2027.

• Q: An analyst asked how the bank will balance share repurchases with accelerating organic loan growth, and when buyback activity will pick up. /

  A: Management noted that for the next couple of quarters, buyback activity will be muted, as excess capital will be deployed to fund high-return organic loan growth rather than repurchases, which will keep the CET1 ratio steady at the 10.7% target midpoint. Buyback activity will resume opportunistically: if CET1 rises above the target range due to slower-than-expected loan growth, or if the stock price declines below management's internal hurdle rate, the bank will increase repurchases.

• Q: An analyst asked about M&A priorities, given the bank's current focus on organic expansion. /

  A: Management confirmed M&A is a very low priority at this time. The bank is not pursuing any acquisitions, as organic expansion in new markets like Florida generates higher returns than potential M&A, and organic growth is the best use of available capital for the foreseeable future.

• Q: An analyst asked if there is more room for branch optimization (cost cuts) to fund expansion into 2027. /

  A: Management confirmed the bank is working on phase three of its branch optimization plan, with additional reconfiguration and closures targeted for rollout in Q4 2026, rolling into 2027. The plan will focus on 2-for-1 or 3-for-1 branch consolidations, delivering incremental cost savings to offset new expansion investments.