Wesbanco Inc: Form 10-Q for the period ended Mar 31, 2025

Management’s Discussion and Analysis (“MD&A”) represents an overview of the results of operations and financial condition of Wesbanco for the three months ended March 31, 2025. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto.

FORWARD-LOOKING STATEMENTS

Forward-looking statements in this report relating to Wesbanco’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with Wesbanco’s Form 10-K for the year ended December 31, 2024 and documents subsequently filed by Wesbanco with the Securities and Exchange Commission (“SEC”) which are available at the SEC’s website, www.sec.gov (http://www.sec.gov) or at Wesbanco’s website, www.wesbanco.com (http://www.wesbanco.com). Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties, including those detailed in Wesbanco’s most recent Annual Report on Form 10-K filed with the SEC under “Risk Factors” in Part I, Item 1A and in Part II, Item 1A of this Form 10-Q. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements, including, without limitation, that the businesses of Wesbanco and Premier Financial Corp. ("PFC") may not be integrated successfully or such integration may take longer to accomplish than expected; the expected cost savings and any revenue synergies from the merger of Wesbanco and PFC may not be fully realized within the expected timeframes; disruption from the merger of Wesbanco and PFC may make it more difficult to maintain relationships with clients, associates, or suppliers; the effects of changing regional and national economic conditions; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to Wesbanco and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, the Federal Deposit Insurance Corporation, the SEC, the Financial Institution Regulatory Authority, the Municipal Securities Rulemaking Board, the Securities Investors Protection Corporation, the Consumer Financial Protection Bureau and other regulatory bodies; potential legislative and federal and state regulatory actions and reform, including, without limitation, the impact of the implementation of the Dodd-Frank Act; adverse decisions of federal and state courts; fraud, scams and schemes of third parties; cyber-security breaches; competitive conditions in the financial services industry; rapidly changing technology affecting financial services; marketability of debt instruments and corresponding impact on fair value adjustments; and/or other external developments materially impacting Wesbanco’s operational and financial performance. Wesbanco does not assume any duty to update forward-looking statements.

OVERVIEW

Wesbanco is a multi-state bank holding company operating through 253 branches and 270 ATM machines in West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana, Michigan and Maryland, offering retail banking, corporate banking, personal and corporate trust services, brokerage services, mortgage banking and insurance. Wesbanco’s businesses are significantly impacted by economic factors such as market interest rates, federal monetary and regulatory policies, local and regional economic conditions and the competitive environment’s effect upon Wesbanco’s business volumes. Wesbanco’s deposit levels are affected by numerous factors including personal savings rates, personal income, and competitive rates on alternative investments, as well as competition from other financial institutions within the markets we serve and liquidity needs of Wesbanco. Loan levels are also subject to various factors including construction demand, business financing needs, consumer spending and interest rates, as well as loan terms offered by competing lenders.

RECENT ACQUISITION

On February 28, 2025, Wesbanco completed its acquisition of PFC, a bank holding company headquartered in Defiance, OH. For additional information regarding the acquisition, see Note 2, “Mergers and Acquisitions."

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Wesbanco’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of March 31, 2025 have remained unchanged from the disclosures presented in Wesbanco’s Annual Report on Form 10-K for the year ended December 31, 2024 within the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

RESULTS OF OPERATIONS

EARNINGS SUMMARY

Wesbanco completed its acquisition of PFC on February 28, 2025. Wesbanco reported a net loss available to common shareholders for the first quarter of 2025 of $11.5 million, or $(0.15) per share, compared to net income of $33.2 million or $0.56 per share, for the first quarter of 2024. As noted in the following table, net income available to common shareholders, excluding after-tax restructuring and merger-related expenses and the after-tax day one provision for credit losses on acquired loans, for the three months ended March 31, 2025, was $51.2 million or $0.66 per share, as compared to $33.2 million or $0.56 per share in the prior year's first three months (non-GAAP measures). Under the Current Expected Credit Loss (“CECL”) accounting standard, which ensures a forward-looking approach to credit risk, Wesbanco was required to estimate and record expected credit losses over the life of the acquired PFC loans. At March 31, 2025, Wesbanco recorded an allowance for credit losses of $88.5 million and a $59.4 million provision for the acquired loan portfolio. This required day one provision for credit losses on acquired loans is considered a non-recurring earnings impact as it is associated with the closing of the PFC acquisition and not indicative of operational or credit quality trends. The first quarter provision for credit losses was $68.9 million and the allowance for credit losses was $233.6 million at March 31, 2025.

(unaudited, dollars in thousands, except per share amounts)

(1) Non-GAAP net income excludes after-tax restructuring and merger-related expenses. The above non-GAAP financial measures used by Wesbanco provide information useful to investors in understanding Wesbanco’s operating performance and trends and facilitate comparisons with the performance of Wesbanco’s peers.

Net interest income increased $44.6 million or 39.1% in the first quarter of 2025 compared to the same quarter of 2024, reflecting the impact of a larger balance sheet from the PFC acquisition, organic loan growth, higher loan and securities yields and $9.1 million of purchase accounting accretion from acquisitions. The yield on earning assets increased by a total of 35 basis points while the cost of interest bearing liabilities decreased by 20 basis points from the first quarter of 2024 to the first quarter of 2025. Average loan balances increased by 25.2% from the first quarter of 2024, mainly attributable to the PFC acquisition and organic commercial loan growth, while average securities increased by 7.6% over the same time period. Average deposits increased 24.3% over the same time period as a result of the PFC acquisition and deposit gathering and retention efforts by the retail and commercial teams producing organic deposit growth. Accretion from acquisitions benefited the first quarter 2025 net interest margin by 19 basis points as compared to three basis points in the first quarter 2024 net interest margin.

In addition to the $59.4 million day one provision for credit losses on acquired loans, the provision increased due to loan growth and adjustments in regional macroeconomic factors and loan concentrations, which resulted in a total provision for credit losses of $68.9 million in the first quarter of 2025, as compared to a provision of $4.0 million in the first quarter of 2024. Annualized net loan charge-offs, as a percentage of average portfolio loans, were 0.08% and 0.20% for the first quarters of 2025 and 2024, respectively.

For the first quarter of 2025, non-interest income increased $4.0 million, or 13.2% compared to the first quarter of 2024, due primarily to the acquisition of PFC which drove higher service charges on deposits, bank-owned life insurance (“BOLI”), digital banking income, and trust fees. Service charges on deposits increased $1.8 million year-over-year, reflecting the addition of PFC, fee income from new products and services and treasury management, and increased general consumer spending. BOLI increased $1.4 million year-over-year due to a $0.9 million death benefit received and the addition of PFC. Gross swap fees were $2.0 million in the first quarter, compared to $0.8 million in the prior year period, while fair value adjustments were a loss of $1.0 million compared to a gain of $0.8 million, respectively.

Non-interest expense, excluding restructuring and merger-related costs, for the three months ended March 31, 2025 was $114.0 million, a $16.8 million, or 17.2%, increase year-over-year primarily due to the addition of the PFC expense base associated with approximately 900 employees and 70 financial centers. Equipment and software expense of $13.1 million, includes the additional cost of operating two core systems until conversion to one platform in mid-May. 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 acquisition of PFC.

For the first quarter of 2025, the effective tax rate was 7.0% as compared to 17.7% for the first three months of 2024, and the benefit for income taxes was $0.7 million for the three months ended March 31, 2025, as compared to a provision of $7.7 million for the three months ended March 31, 2024. The benefit for income taxes is due to a net loss recorded for the three months ended March 31, 2025, which resulted from the day one provision for credit losses recorded on the PFC acquired loans as compared to net income for the three months ended March 31, 2024.

NET INTEREST INCOME

TABLE 1. NET INTEREST INCOME

(unaudited, dollars in thousands)

Net interest income, which is Wesbanco’s largest source of revenue, is the difference between interest income on earning assets, primarily loans and securities, and interest expense on liabilities, primarily deposits and short and long-term borrowings. Net interest income is affected by the general level of, and changes in interest rates, the steepness and shape of the yield curve, changes in the amount and composition of interest earning assets and interest bearing liabilities, as well as the frequency of repricing of existing assets and liabilities. In the first quarter of 2025, Wesbanco successfully completed its acquisition of PFC. Net interest income increased $44.6 million or 39.1% in the first quarter of 2025 compared to the first quarter of 2024. The increase is due to an increase of average loans of 25.2% in the first quarter of 2025 as compared to the first quarter of 2024, due to the acquisition of PFC, strong new loan growth, strategic loan production office and lender hiring initiatives. In addition, total purchase accounting accretion contributed 19 basis points to the first quarter 2025 net interest margin as compared to three basis points of margin contribution in the first quarter of 2024. Total average deposits increased by $3.2 billion or 24.3% in the first quarter of 2025 as compared to the first quarter of 2024. The cost of interest bearing deposits decreased by one basis point and the cost of total interest bearing liabilities decreased by 20 basis points from the first quarter of 2024 to the first quarter of 2025. The decrease in the cost is primarily due to rate decreases for interest bearing deposits in response to the general decrease in overall deposit rates in the marketplace as well as purchase accounting accretion on certificates of deposit.

Interest income increased $57.9 million or 29.6% in the first quarter of 2025 compared to the same period of 2024. Average loan balances increased $3.0 billion or 25.2% in the first quarter of 2025 compared to the first quarter of 2024, while loan yields increased by 31 basis points during this same period to 6.02% due to previously mentioned acquisition of PFC and accompanying loan growth of higher yielding loans. Loans provide the greatest impact on interest income and the yield on earning assets as they have the largest balance and the highest yield within major earning asset categories. In the first quarter of 2025, average loans represented 76.1% of average earning assets, an increase from 74.0% in the first quarter of 2024. Average total securities balances increased $281.8 million or 7.6% from the first quarter of 2024 and represented 20.5% of total earning assets in the first quarter of 2025. Taxable securities yields increased by 40 basis points in the first quarter of 2025 from the first quarter of 2024. Tax-exempt securities yields, which are the highest yields within total securities, increased 10 basis points from the first quarter of 2024.

Interest expense increased $13.3 million in the first quarter of 2025 as compared to the same period in 2024, due to both the timing of the prior year federal funds rate decreases and their effect on the costs of deposits and borrowings and the acquisition of PFC. The cost of interest bearing liabilities decreased by 20 basis points from the first quarter of 2024 to 2.78% in the first quarter of 2025. Average interest bearing deposits increased $2.8 billion or 30.1% from the first quarter of 2024. The rate on interest bearing deposits decreased one basis point to 2.55% from the first quarter of 2024. Average non-interest bearing demand deposit balances decreased from the first quarter of 2024 to the first quarter of 2025 by $404.9 million or 10.4%, and were 26.1% of total average deposits at March 31, 2025, compared to 29.4% at March 31, 2024, reflecting customers' preferences in the current interest rate environment. For the first quarter of 2025, Wesbanco's average loans to average deposits ratio was 89.3%, reflecting additional capacity to lend. The average balance of FHLB borrowings decreased $74.4 million from the first quarter of 2024 to the first quarter of 2025. The average balance of repurchase agreements and subordinated and junior subordinated debt balances increased $26.2 million from the first quarter of 2024 to the first quarter of 2025.

TABLE 2. AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN ANALYSIS

(unaudited, dollars in thousands)

(1) Gross of the allowance for credit losses, net of unearned income and includes non-accrual loans and loans held for sale. Loan fees included in interest income on loans were $1.6 million and $0.3 million for the three months ended March 31, 2025 and 2024, respectively. Additionally, loan accretion included in interest income on loans acquired from prior acquisitions was $6.9 million and $0.8 million for the three months ended March 31, 2025 and 2024, respectively.

(2) Average yields on available-for-sale debt securities are calculated based on amortized cost.

(3) Taxable equivalent basis is calculated on tax-exempt securities using a federal statutory tax rate of 21% for each period presented.

(4) Accretion on interest bearing liabilities acquired from prior acquisitions was $2.3 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively.

TABLE 3. RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE

(unaudited, in thousands)

(1) Taxable equivalent basis is calculated on tax-exempt securities using a federal statutory tax rate of 21%.

PROVISION FOR CREDIT LOSSES – LOANS AND LOAN COMMITMENTS

The provision for credit losses – loans is the amount to be added to the allowance for credit losses – loans after net charge-offs have been deducted to bring the allowance to a level considered appropriate to absorb lifetime expected losses for all portfolio loans. The provision for credit losses – loan commitments is the amount to be added to the allowance for credit losses for loan commitments to bring that allowance to a level considered appropriate to absorb lifetime expected losses on unfunded loan commitments. For the first quarter of 2025, we recorded a provision for credit losses of $68.9 million, which is an increase of $64.9 million compared to the provision for credit losses of $4.0 million recorded in the first quarter of 2024, primarily due to the initial provision expense recorded for the PFC acquired loans. As compared to the same period in the prior year, the increase in provision for credit losses for the three months ended March 31, 2025, outside of the initial provision expense recorded on non-PCD loans and unfunded commitments due to the PFC acquisition, primarily reflects an increase in the reserve for individually evaluated loans, the impact of continued uncertainty in the economic outlook on certain commercial portfolios, and an increase in the Bank’s percentage of criticized and classified loans.

Non-performing loans were 0.44% of total portfolio loans as of March 31, 2025, increasing from 0.28% of total portfolio loans at the end of the first quarter of 2024. Criticized and classified loans were 3.32% of total portfolio loans as of March 31, 2025, increasing from 2.30% as of March 31, 2024, due to downgrades within the loan portfolio. Past due loans at March 31, 2025 were 0.43% of total portfolio loans, compared to 0.20% at March 31, 2024. Annualized net loan charge-offs were 0.08% for the three months ended March 31, 2025, compared to 0.20% for the three months ended March 31, 2024. Please see the Allowance for Credit Losses – Loans and Loan Commitments section of this MD&A for additional discussion.

NON-INTEREST INCOME

TABLE 4. NON-INTEREST INCOME

(unaudited, dollars in thousands)

Non-interest income is a significant source of revenue and an important part of Wesbanco’s results of operations, as it represents 17.9% of total revenue for the three months ended March 31, 2025. Wesbanco offers its customers a wide range of retail, commercial, investment and digital banking services, which are viewed as a vital component of Wesbanco’s ability to attract and maintain customers, as well as providing additional fee income beyond normal spread-related income to Wesbanco. For the first quarter of 2025, non-interest income increased $4.0 million or 13.2% compared to the first quarter of 2024, primarily due to a $1.8 million increase in service charges on deposits, a $1.4 million increase in bank-owned life insurance, a $0.7 million increase in digital banking income, a $0.6 million increase in trust fees, and a $0.4 million increase in mortgage banking income. This was partially offset by a $0.9 million decrease in net securities gains and a $0.6 million decrease in net swap fee and valuation income.

Trust fees increased $0.6 million or 7.6% compared to the first quarter of 2024, due to an increase in the market value of trust assets. Total trust assets were $7.0 billion as of March 31, 2025, including $1.0 billion in trust assets acquired in the PFC acquisition, as compared to $5.6 billion at March 31, 2024. As of March 31, 2025, trust assets include managed assets of $5.5 billion and non-managed (custodial) assets of $1.5 billion. Assets managed for the WesMark Funds, a proprietary group of mutual funds that is advised by Wesbanco Trust and Investment Services, were $0.8 billion and $0.9 billion as of March 31, 2025 and March 31, 2024, respectively, and are included in managed assets.

Service charges on deposits increased $1.8 million or 26.6% in the first quarter of 2025 compared to the first quarter of 2024, due to an increase in transactional fee income and treasury management fee income, with $0.9 million coming from the acquisition of PFC.

Digital banking income increased $0.7 million or 14.9% in the first quarter of 2025 compared to the first quarter of 2024, due to the acquisition of PFC and the corresponding increase in debit card interchange fee income.

Net swap fee and valuation income, which includes fair value adjustments, decreased $0.6 million or 38.5% in the first quarter of 2025 compared to the first quarter of 2024, due to a decrease in fair value adjustments on existing swaps offset by an increase in swap fee income. For the three months ended March 31, 2025, new swaps executed of $159.7 million in notional principal resulted in $2.0 million of fee income as compared to new swaps executed of $36.6 million in notional principal, resulting in $0.8 million of fee income for the three months ended March 31, 2024. Fair value adjustments on existing swaps for the three months ended March 31, 2025 were negative $1.0 million as compared to positive $0.8 million for the three months ended March 31, 2024.

Bank-owned life insurance increased $1.4 million or 65.8% in the first quarter of 2025 compared to the first quarter of 2024, due to more mortality benefits in 2025 accounting for $0.9 million of the increase as well as $0.5 million in income due to consolidating PFC bank-owned life insurance with Wesbanco.

Net securities gains include both gains and losses on investment security transactions as well as market value adjustments on Wesbanco's deferred compensation plan. For the three months ended March 31, 2025, net securities gains decreased $0.9 million compared to the same period in 2024, due to a $0.4 million decrease in market adjustments on the deferred compensation plan in the first quarter of 2025 as compared to a $0.6 million increase in market adjustments in the first quarter of 2024.

Mortgage banking income increased $0.4 million or 64.5% in the first quarter of 2025 compared to the first quarter of 2024, due to an increase in fair value adjustments on mortgage derivatives. For the first quarter of 2025, total mortgage production was $116.1 million, which increased by 9.2% from the first quarter of 2024. For the three months ended March 31, 2025, $62.0 million in mortgages were sold into the secondary market as compared to $48.4 million in the comparable 2024 period. Included in mortgage banking income above are a gain of $0.4 million and a loss of $0.1 million from the fair value adjustments on mortgage loan commitments and related derivatives for the three months ended March 31, 2025 and 2024, respectively.

NON-INTEREST EXPENSE

TABLE 5. NON-INTEREST EXPENSE

(unaudited, dollars in thousands)

Non-interest expense in the first quarter of 2025 increased $36.8 million or 37.8% as compared to the same quarter in 2024, principally from a $20.0 million increase in restructuring and merger-related expenses, a $5.6 million increase in salaries and wages, a $3.0 million increase in equipment and software expense, a $2.1 million increase in amortization of intangible assets, a $1.7 million increase in supplies, postage and other operating expense, and a $1.2 million increase in net occupancy.

Salaries and wages increased $5.6 million or 13.0% in the first quarter of 2025 as compared to the first quarter of 2024 due to an increase from the incorporation of approximately 900 PFC employees as well as an increase in bonus expense and severance payouts.

Net occupancy increased $1.2 million or 17.4% in the first quarter of 2025 as compared to the first quarter of 2024 due to the acquisition of PFC’s fixed assets and leases which caused an increase in repairs and general maintenance, lease payments, and utilities.

Equipment and software costs increased $3.0 million or 30.4% in the first quarter of 2025 as compared to the first quarter of 2024, due primarily to the acquisition of PFC which caused the additional cost of operating two core systems until conversion to one platform in mid-May and the continued improvements made in automating and enhancing processes.

Amortization of intangible assets increased $2.1 million or 101.9% in the first quarter of 2025 as compared to the first quarter of 2024, due to the $151.5 million core deposit intangible asset that was created from the acquisition of PFC.

Restructuring and merger-related expenses increased $20.0 million in the first quarter of 2025 as compared to the first quarter of 2024, due to merger-related expenses incurred for the acquisition of PFC.

Supplies, postage and other operating expense increased by $1.7 million or 24.9% in the first quarter of 2025 as compared to the first quarter of 2024 primarily due to an increase in general operating expenses following the acquisition of PFC.

INCOME TAXES

The benefit for income taxes was $0.7 million for the three months ended March 31, 2025, as compared to a provision of $7.7 million for the three months ended March 31, 2024. The benefit for income taxes is due to a net loss recorded for the three months ended March 31, 2025, which resulted from the day one provision for credit losses recorded on the PFC acquired loans as compared to net income for the three months ended March 31, 2024.

FINANCIAL CONDITION

Total assets increased 46.7%, while shareholders' equity increased 35.5% at March 31, 2025 as compared to December 31, 2024. Total securities increased $908.2 million or 26.6% from December 31, 2024 to March 31, 2025, as a result of the PFC acquisition. In addition, approximately $775 million of lower coupon or variable rate PFC securities were sold and replaced with approximately $475 million of longer-term, higher coupon fixed rate securities. Total portfolio loans were $18.7 billion, which increased $6.0 billion or 47.5% since December 31, 2024 driven by acquired PFC loans of $5.9 billion and organic growth of $0.9 billion, with $0.8 billion from the commercial teams. Deposits increased $7.2 billion, or 50.6% from December 31, 2024, reflecting the addition of $6.9 billion of PFC deposits, which included $1.3 billion in certificates of deposit. At March 31, 2025, total demand deposits represented 49% of total deposits, with the non-interest bearing component representing 25%. Total organic deposit growth was 8.1% from the first quarter of 2024 to the first quarter of 2025. Total FHLB borrowings increased $476.5 million or 47.7% during the first three months of 2025, due to the addition of borrowings from PFC. Shareholders' equity increased $1.0 billion or 35.5% from December 31, 2024 to March 31, 2025, primarily due to the capital impact of the purchase of PFC.

SECURITIES

TABLE 6. COMPOSITION OF SECURITIES (1)

(unaudited, dollars in thousands)

(1) At March 31, 2025 and December 31, 2024, there were no holdings of any one issuer, other than U.S. government sponsored entities and its agencies, in an amount greater than 10% of Wesbanco’s shareholders’ equity.

(2) Weighted average yields have been calculated on a taxable-equivalent basis using the federal statutory tax rate of 21%.

Total investment securities, which are a source of liquidity for Wesbanco as well as a contributor to interest income, increased by $908.2 million or 26.6% from December 31, 2024 to March 31, 2025. Through the first three months of the year, the available-for-sale portfolio increased by $903.0 million or 40.2%. In the PFC acquisition, Wesbanco acquired approximately $1.1 billion in available-for-sale investment securities. Immediately following the acquisition, portfolio restructuring was completed of which $775.0 million of the acquired securities were sold and were replaced with $475.0 million of higher coupon, longer-term securities. The held-to-maturity portfolio, which had no impact from the acquisition, decreased by $9.5 million or 0.8% due primarily to maturities and calls of municipal securities. The weighted average yield of the portfolio increased 52 basis points from 2.67% at December 31, 2024 to 3.19% at March 31, 2025, primarily due to the acquisition of PFC's investment securities at current market rates and the purchase of replacement securities at higher current rates.

Total gross unrealized securities losses decreased $40.4 million from $441.7 million at December 31, 2024 to $401.3 million at March 31, 2025. The decrease in unrealized losses from December 31, 2024 was due to a decrease in market rates in 2025 to date, causing market prices to increase. Wesbanco believes that none of the unrealized losses on available-for-sale securities at March 31, 2025 require an allowance for credit losses. Please refer to Note 4, “Securities,” of the Consolidated Financial Statements for additional information. Wesbanco does not have any investments in private mortgage-backed securities or those that are collateralized by sub-prime mortgages, nor does Wesbanco have any exposure to collateralized debt obligations or government-sponsored enterprise preferred stocks.

Net unrealized losses on available-for-sale securities included in accumulated other comprehensive income, net of tax, as of March 31, 2025 and December 31, 2024 were $195.7 million and $223.8 million, respectively. These net unrealized pre-tax losses represent temporary fluctuations resulting from changes in market rates in relation to fixed yields in the available-for-sale portfolio, and on an after-tax basis are accounted for as an adjustment to other comprehensive income in shareholders’ equity. Net unrealized pre-tax losses in the held-to-maturity portfolio, which are not accounted for in other comprehensive income, were $140.6 million at March 31, 2024, compared to $146.1 million at December 31, 2024. With approximately 26% of the investment portfolio in the held-to-maturity category, the recent volatility in interest rates does not have as much impact on other comprehensive income as if the entire portfolio were included in the available-for-sale category.

Equity securities, of which a portion consists of investments in various mutual funds held in grantor trusts formed in connection with a key officer and director deferred compensation plan, are recorded at fair value. Gains and losses due to fair value fluctuations on equity securities are included in net securities gains or losses. For those equity securities relating to the key officer and director deferred compensation plan, the corresponding change in the obligation to the employee is recognized in employee benefits expense.

The corporate and municipal bonds in Wesbanco’s held-to-maturity debt portfolio are analyzed quarterly to determine if an allowance for current expected credit losses is warranted. Wesbanco uses a database of historical financials of all corporate and municipal issuers and actual historic default and recovery rates on rated and non-rated transactions to estimate expected credit losses on an individual security basis. The expected credit losses are adjusted quarterly and are recorded in an allowance for expected credit losses on the balance sheet, which is deducted from the amortized cost basis of the held-to-maturity portfolio as a contra asset. The losses are recorded on the consolidated income statement in the provision for credit losses. Accrued interest receivable on held-to-maturity securities, which was $8.2 million and $8.4 million as of March 31, 2025 and December 31, 2024, respectively, is excluded from the estimate of credit losses. Held-to-maturity investments in U.S. Government sponsored entities and agencies as well as mortgage-backed securities and collateralized mortgage obligations, which are all either issued by a direct governmental entity or a government-sponsored entity, have no historical evidence supporting expected credit losses; therefore, Wesbanco has estimated these losses at zero, and will monitor this assumption in the future for any economic or governmental policies that could affect this assumption.

Wesbanco uses prices from independent pricing services and, to a lesser extent, indicative (non-binding) quotes from independent brokers, to measure the fair value of its securities. Wesbanco validates prices received from pricing services or brokers using a variety of methods, including, but not limited to, comparison to secondary pricing services, corroboration of pricing by reference to other independent market data such as secondary broker quotes and relevant benchmark indices, review of pricing by personnel familiar with market liquidity and other market-related conditions, review of pricing service methodologies, review of independent auditor reports received from the pricing service regarding its internal controls, and through review of inputs and assumptions used in pricing certain securities thinly traded or with limited observable data points. The procedures in place provide management with a sufficient understanding of the valuation models, assumptions, inputs and pricing to reasonably measure the fair value of Wesbanco’s securities. For additional disclosure relating to fair value measurements, refer to Note 10, “Fair Value Measurement” in the Consolidated Financial Statements.

LOANS AND CREDIT RISK

Loans represent Wesbanco’s single largest balance sheet asset classification and the largest source of interest income. Business purpose loans consist of CRE loans and other C&I loans that are not secured by real estate. CRE loans are further segmented into land and construction loans, and loans for improved property. Consumer purpose loans consist of residential real estate loans, home equity lines of credit and other consumer loans. Loans held for sale generally consist of residential real estate loans originated for sale in the secondary market, but at times may also include other types of loans. The outstanding balance of each major category of the loan portfolio is summarized in Table 7.

The risk that borrowers will be unable or unwilling to repay their obligations and default on loans is inherent in all lending activities. Credit risk arises from many sources including general economic conditions, external events that impact businesses or industries, isolated events that impact a major employer, individual loss of employment or other personal hardships, as well as changes in interest rates or the value of collateral. Credit risk is also impacted by a concentration of exposure within a geographic market or to one or more borrowers, industries or collateral types. The primary goal in managing credit risk is to minimize the impact of default by an individual borrower or group of borrowers. Credit risk is managed through the initial underwriting process as well as through ongoing monitoring and administration of the portfolio that varies by the type of loan. The Bank’s credit policies establish standard underwriting guidelines for each type of loan and require an appropriate evaluation of the credit characteristics of each borrower. This evaluation includes the borrower’s primary source of repayment capacity; the adequacy of collateral, if any, to secure the loan; the potential value of personal guarantees as secondary sources of repayment; and other factors unique to each loan that may increase or mitigate its risk. Credit bureau scores are also considered when evaluating consumer purpose loans as well as guarantors of business purpose loans. However, the Bank does not periodically update credit bureau scores subsequent to when loans are made to determine changes in credit history.

Credit risk is mitigated for all types of loans by continuously monitoring delinquency levels and pursuing collection efforts at the earliest stage of delinquency. The Bank also monitors general economic conditions, including employment, housing activity and real estate values in its market. The Bank also periodically evaluates and changes its underwriting standards when warranted based on market conditions, the historical performance of a category of the portfolio, or other external factors. Credit risk is also regularly evaluated for the impact of adverse economic and other events that increase the risk of default and the potential loss in the event of default, to understand the impact on the Bank’s earnings and capital.

Commercial loan risk grades are determined based on an evaluation of the relevant characteristics of each loan, assigned at inception and adjusted thereafter at any time to reflect changes in the risk profile throughout the life of each loan. The primary factors used to determine the risk grade are the sufficiency, reliability and sustainability of the primary source of repayment and overall financial strength of the borrower. The rating system more heavily weights the debt service coverage, leverage and loan-to-value factors to derive the risk grade. Other factors that are considered at a lesser weighting include management, industry or property-type risks, payment history, collateral and personal guarantees.

TABLE 7. COMPOSITION OF LOANS (1)

(unaudited, dollars in thousands)

(1) Loans are presented gross of the allowance for loan credit losses – loans and net of unearned income, credit valuation adjustments, and unamortized net deferred loan fee income and loan origination costs.

Total portfolio loans increased $6.0 billion or 47.5% from December 31, 2024, and have increased $6.8 billion or 57.3% over the past twelve months. While most of the increase is due to the PFC acquisition, with attributable portfolio loans totaling $5.9 billion as of March 31, 2025, organic growth has occurred as well. Excluding PFC, organic loans increased $166.1 million or 1.3% since December 31, 2024 and $1.0 billion or 8.0% year-over-year. Excluding PFC, originations for loans continue to outpace repayments, leading to organic growth in several loan categories, including 19.3% in commercial real estate ("CRE") land and construction loans, 13.1% in home equity lines of credit, 9.3% in CRE improved property, 6.6% in commercial and industrial, and 1.8% in residential real estate. Consumer loans have decreased somewhat at 18.0%.

Total loan commitments of $6.3 billion, including loans approved but not closed, increased $1.5 billion or 31.3% from December 31, 2024 due primarily to increased lines of credit from the PFC acquisition. The average line utilization percentage for the commercial portfolio was 37.3% for the three months ended March 31, 2025 compared to 35.2% for the three months ended December 31, 2024.

The commercial portfolio is monitored for potential concentrations of credit risk by market, type of lending, CRE property type, C&I and owner-occupied CRE by industry, investment CRE dependence on common tenants and industries or property types that are similarly impacted by external factors. The breakdown for all CRE – improved property is 27% owner-occupied and 73% investor-owned. The Bank has instituted additional monitoring of the office building portfolio, as remote work has put pressure on the need for dedicated office space in certain markets. The office portfolio breakdown within CRE – improved property is 34% owner-occupied and 66% investor-owned. Investor-owned office buildings represent 3.2% of the total loan portfolio.

Loans held for sale are typically originated residential mortgages that are committed to be sold into the secondary market, but at March 31, 2025, also include certain commercial loans from the PFC acquisition that have been designated for sale. Excluding PFC, loans held for sale were $21.4 million at March 31, 2025, an increase of $2.7 million or 14.7% from December 31, 2024.

NON-PERFORMING ASSETS AND LOANS PAST DUE 90 DAYS OR MORE

Non-performing assets consist of non-accrual loans, other real estate acquired through or in lieu of foreclosure, bank premises held for sale, and repossessed automobiles acquired to satisfy defaulted consumer loans.

TABLE 8. NON-PERFORMING ASSETS

(unaudited, dollars in thousands)

Non-performing loans consist only of non-accrual loans. Non-performing loans increased $41.7 million or 105.0% from December 31, 2024. (Please see the Notes to the Consolidated Financial Statements for additional discussion).

The following table presents past due and accruing loans excluding non-accruals:

TABLE 9. PAST DUE AND ACCRUING LOANS EXCLUDING NON-ACCRUALS

(unaudited, dollars in thousands)

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Loans past due 30 days or more and accruing interest, excluding non-accruals, increased $21.0 million or 35.3% from December 31, 2024. These loans continue to accrue interest because they are both well-secured and in the process of collection. Loans 90 days or more past due decreased $2.8 million and represented 0.06% of total portfolio loans at March 31, 2025 and 0.11% at December 31, 2024. Loans 30 to 89 days past due represented 0.37% of total portfolio loans at March 31, 2025 and 0.36% at December 31, 2024.

ALLOWANCE FOR CREDIT LOSSES - LOANS AND LOAN COMMITMENTS

As of March 31, 2025, the total allowance for credit losses – loans and commitments was $240.1 million, of which $233.6 million related to loans and $6.5 million related to loan commitments. The allowance for credit losses – loans was 1.25% of total portfolio loans as of March 31, 2025, compared to 1.10% as of December 31, 2024. At March 31, 2025, the total allowance for credit losses related to the PFC acquisition was $88.5 million, consisting of an allowance for loan losses of $87.1 million, which included a $29.1 million reserve on PCD loans. The reserve for PFC commitments is $1.0 million. Outside of the allowance for credit losses recorded for the PFC acquisition, the Wesbanco legacy allowance for credit losses at March 31, 2025 increased $7.1 million. The allowance for credit losses – loans individually-evaluated increased $6.3 million from December 31, 2024 to March 31, 2025. The population of individually-evaluated loans consisted of eight relationships, with a total outstanding loan balance of $48.1 million. The allowance for loan losses on Wesbanco legacy collectively-evaluated increased from December 31, 2024 to March 31, 2025 by $1.5 million. The allowance for credit losses- loan commitments was $5.4 million at March 31, 2025 as compared to $6.1 million as of December 31, 2024, and is included in other liabilities on the Consolidated Balance Sheets.

The allowance for credit losses by loan category, presented in Note 5, “Loans and the Allowance for Credit Losses” of the Consolidated Financial Statements, summarizes the impact of changes in various factors that affect the allowance for loan losses in each segment of the portfolio. The allowance for credit losses under CECL is calculated utilizing the probability of default (“PD”) divided by the loss given default (“LGD”), which is then discounted to net present value. PD is the probability the asset will default within a given time frame and LGD is the percentage of the asset not expected to be collected due to default. The primary macroeconomic drivers of the quantitative model include forecasts of national unemployment and interest rates, as well as modeling adjustments for changes in prepayment speeds, portfolio mix, concentrations and loan growth. For the calculation as of March 31, 2025, the forecast was based upon a probability weighted approach which is designed to incorporate loss projections from a baseline, upside and downside economy. Due to the nonlinearity of credit losses to the economy, the asymmetry is best captured by evaluating multiple economic scenarios through a probability weighted approach. At quarter-end, national unemployment was projected to be 4.4%, and subsequently increase to an average of 5.0% over the remainder of the forecast period. Quarterly changes to the economic drivers of the quantitative model, including changes to the portfolio mix as well as an increase in the Bank’s qualitative adjustments caused the allowance for credit losses - loans to increase from December 31, 2024 to March 31, 2025 by $1.5 million related to Wesbanco legacy loans.

Criticized and classified loans were 3.32% of total portfolio loans, or $620.1 million, at March 31, 2025, increasing from 2.80% of total portfolio loans, or $354.7 million, at December 31, 2024. See Note 5, “Loans and the Allowance for Credit Losses” for more information.

Table 10 summarizes the allocation of the allowance for credit losses to each category of the loan portfolio.

TABLE 10. ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES – LOANS AND LOAN COMMITMENTS

(unaudited, dollars in thousands)

Although the allowance for credit losses is allocated as described in Table 10, the total allowance is available to absorb actual losses in any category of the loan portfolio. However, differences between management’s estimation of probable losses and actual net charge-offs in subsequent periods for any category may necessitate future adjustments to the allowance for credit losses applicable to the category. Management believes the allowance for credit losses is appropriate to absorb expected losses at March 31, 2025.

DEPOSITS

TABLE 11. DEPOSITS

(unaudited, dollars in thousands)

Deposits, which represent Wesbanco’s primary source of funds, are offered in various account forms at various rates through Wesbanco’s 253 financial centers. The Federal Deposit Insurance Corporation (the "FDIC") insures deposits up to $250,000 per account owner.

Total deposits increased $7.2 billion or 50.6% during the first three months of 2025. Money market deposit accounts, demand deposits and savings deposits increased 100.6%, 35.5%, and 29.9%, respectively. The net increase in deposits is attributable to acquired PFC deposits totaling $6.9 billion and reflects the benefit of deposit gathering and retention efforts by both retail and commercial teams. Deposit balances were also impacted by bonus and royalty payments for Marcellus and Utica shale gas payments from energy companies in Wesbanco’s southwestern Pennsylvania, eastern Ohio and northern West Virginia markets. In addition, Wesbanco also participates in the Insured Cash Sweep ("ICS®") deposit program. ICS® reciprocal balances totaled $1.4 billion and $1.3 billion at March 31, 2025 and December 31, 2024, respectively. In addition, ICS® one-way buys totaled $200.5 million and $200.6 million at March 31, 2025 and December 31, 2024, respectively.

Certificates of deposit increased 75.4% from December 31, 2024 to March 31, 2025. Wesbanco does not generally solicit brokered or other deposits out-of-market or over the internet but does participate in the Certificate of Deposit Account Registry Services ("CDARS®") program. CDARS® balances totaled $136.9 million in outstanding balances at March 31, 2025, of which $1.1 million represented one-way buys, compared to $49.8 million in total outstanding balances, none of which represented one-way buys, at December 31, 2024. Certificates of deposit greater than $250,000 were approximately $777.2 million at March 31, 2025 compared to $442.8 million at December 31, 2024. Certificates of deposit totaling approximately $2.8 billion at March 31, 2025 with a cost of 3.81% are scheduled to mature within the next 12 months. From time to time, the Bank may offer special promotions or match competitor rates on certain certificates of deposit maturities and savings products based on competition, sales strategies, liquidity needs and wholesale borrowing costs.

BORROWINGS

TABLE 12. BORROWINGS

(unaudited, dollars in thousands)

While borrowings are a significant source of funding for Wesbanco, they are less significant as compared to total deposits. FHLB borrowings increased $476.5 million from December 31, 2024 to March 31, 2025, as $900.0 million in new advances and $500.0 million in advances from the PFC acquisition were partially offset by $925.0 million in maturities. The average cost of maturing FHLB advances for the first three months of 2025 was 4.68% while the average cost of new borrowings was 4.61%.

Other short-term borrowings, which may consist of federal funds purchased, repurchase agreements and overnight sweep checking accounts were $147.8 million at March 31, 2025, compared to $192.1 million at December 31, 2024. There were no outstanding federal funds purchased at either March 31, 2025 or December 31, 2024.

Subordinated debentures and junior subordinated debt increased $81.1 million to $360.2 million at March 31, 2025, primarily as a result of subordinated debentures totaling $49.1 million and junior subordinated debt totaling $31.7 million from the PFC acquisition.

CAPITAL RESOURCES

Shareholders' equity increased $991.3 million or 35.5% from December 31, 2024, to $3.8 billion at March 31, 2025. The increase resulted primarily from $1.0 billion in common stock issued in the PFC acquisition, coupled with a $27.9 million other comprehensive gain for the three months ended March 31, 2025, which were partially offset by a $9.0 million net loss, and the declaration of common and preferred shareholder dividends totaling $35.2 million and $2.5 million, respectively, for the three months ended March 31, 2025. Wesbanco also increased its quarterly dividend rate $0.01 per quarter to $0.37 per share in November 2024, representing a 2.8% increase over the prior quarterly rate and a cumulative 164% increase since 2010.

Wesbanco did not purchase any shares of its common stock on the open market during the three-month period ended March 31, 2025 under the current share repurchase authorization. At March 31, 2025, the remaining shares authorized to be purchased under the last approved repurchase plan totaled 969,589 shares.

Regulatory guidelines require bank holding companies and commercial banks to maintain certain minimum capital ratios and define companies as “well capitalized” that sufficiently exceed the minimum ratios. At March 31, 2025, regulatory capital levels for both the Bank and Wesbanco were substantially greater than the minimum amounts needed to be considered “well capitalized” under the regulations. There are various legal limitations under federal and state laws that limit the payment of dividends from the Bank to Wesbanco. As of March 31, 2025, under FDIC regulations, Wesbanco could receive, without prior regulatory approval, a dividend of approximately $312.7 million from the Bank. The Tier 1 leverage ratio as of March 31, 2025 is elevated due to the impact of the timing of the close of the PFC acquisition on the calculation of average assets used in the denominator.

On March 26, 2020, regulators issued interim financial rule (“IFR”) “Regulatory Capital Rule: Revised Transition of the Current Expected Losses Methodology for Allowances” in response to the disrupted economic activity from the spread of COVID-19. The IFR provides financial institutions that adopt CECL during 2020 with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided by the initial two-year delay (“five-year transition”). Wesbanco adopted CECL effective January 1, 2020 and elected to implement the five-year transition. The five year transition ended on January 1, 2025.

The following table summarizes risk-based capital amounts and ratios for Wesbanco and the Bank for the periods indicated:

(unaudited, dollars in thousands)

(1) Minimum requirements to remain adequately capitalized.

(2) Well-capitalized under prompt corrective action regulations.

LIQUIDITY RISK

Liquidity is defined as a financial institution’s capacity to meet its cash and collateral obligations at a reasonable cost. Liquidity risk is the risk that an institution’s financial condition or overall safety and soundness is adversely affected by an inability, or perceived inability, to meet its obligations. An institution’s obligations, and the funding sources to meet them, depend significantly on its business mix, balance sheet structure, and the cash flows of its on- and off-balance sheet obligations. Institutions confront various internal and external situations that can give rise to increased liquidity risk including funding mismatches, market constraints on funding sources, contingent liquidity events, changes in economic conditions, and exposure to credit, market, operation, legal and reputation risk. Wesbanco actively manages liquidity risk through its ability to provide adequate funds to meet changes in loan demand, unexpected outflows in deposits and other borrowings as well as to take advantage of market opportunities and meet operating cash needs. This is accomplished by maintaining liquid assets in the form of securities, sufficient borrowing capacity and a stable core deposit base. Liquidity is centrally monitored by Wesbanco’s Asset/Liability Committee (“ALCO”) with direct oversight from the Board of Directors ("BOD").

Wesbanco determines the degree of required liquidity by the relationship of total holdings of liquid assets to potential funding needs to meet unexpected deposit losses and/or loan demands. The ability to quickly convert assets to cash at a minimal loss is a primary function of managing Wesbanco’s investment portfolio. Wesbanco believes its cash flow from the loan portfolio, the investment portfolio, and other sources, adequately meet its liquidity requirements. Wesbanco’s net loans to assets ratio was 67.3% at March 31, 2025 and deposit balances funded 77.7% of assets.

The following table lists the sources of liquidity from assets at March 31, 2025 expected within the next year:

(unaudited, in thousands)

(1) Projected prepayments are based on current prepayment speeds.

Deposit cash flows are another principal factor affecting overall Wesbanco liquidity. Deposits totaled $21.3 billion at March 31, 2025. Deposit cash flows are impacted by current interest rates, products and rates offered by Wesbanco versus various forms of competition, as well as customer behavior. Certificates of deposit scheduled to mature within one year totaled $2.8 billion at March 31, 2025, with a weighted average cost of 3.81%, which includes jumbo regular certificates of deposit totaling $1.6 billion with a weighted-average cost of 4.01%, and jumbo CDARS® certificates of deposit of $128.4 million with a weighted-average cost of 4.03%. Wesbanco had $1.1 million brokered one-way buys at March 31, 2025.

Uninsured deposits, as reported for regulatory purposes, totaled $6.7 billion at March 31, 2025, or 32% of total deposits. Uninsured deposits include $2.5 billion of public funds deposits that are over the FDIC-insured limit. Wesbanco secures these public funds deposits by pledging investment securities with a market value at or above the deposit balance. Excluding these public funds, at March 31, 2025, uninsured deposits were $4.2 billion, or 20% of total deposits.

Wesbanco maintains a line of credit with the FHLB as an additional funding source. Available credit with the FHLB approximated $5.9 billion and $3.7 billion at March 31, 2025 and December 31, 2024, respectively. The FHLB requires securities to be specifically pledged to the FHLB and maintained in a FHLB-approved custodial arrangement if the member wishes to include such securities in the maximum borrowing capacity calculation. Wesbanco has elected not to specifically pledge to the FHLB unpledged securities. Wesbanco can also use this line of credit for pledging collateral to cover public funds deposits, as an alternative to pledging securities from the investment portfolio. At March 31, 2025, the Bank had unpledged available-for-sale securities with an estimated fair value of $533.8 million, or 17.2% of the total available-for-sale portfolio. A portion of these securities could be sold for additional liquidity, or such securities could be pledged to secure additional FHLB borrowings. Approximately 68% of the portfolio is pledged to public deposit customers. Wesbanco monitors exposure to public funds deposits in relation to pledging requirements and provides ICS® deposits via IntraFi® as a solution for a portion of new and existing public fund depositors. In addition, at March 31, 2025, the Bank had unpledged held-to-maturity securities with an estimated fair value of $593.1 million. Approximately 97%, or $574.4 million of these securities are municipal securities, which can only be pledged in limited circumstances. Generally, these securities cannot be sold without tainting the remainder of the held-to-maturity portfolio. If tainting occurs, all remaining securities with the held-to-maturity designation would be required to be reclassified as available-for-sale, and the held-to-maturity designation would not be available to Wesbanco for a period of time.

Wesbanco participates in the Federal Reserve Bank’s Borrower-in-Custody Program (“BIC”) whereby Wesbanco pledges certain consumer loans as collateral for borrowings. Wesbanco did not have any BIC borrowings outstanding at March 31, 2025. Alternative funding sources may include the utilization of existing overnight lines of credit with third party banks totaling $235.0 million, none of which was outstanding at March 31, 2025, along with seeking other lines of credit, borrowings under repurchase agreement lines, increasing deposit rates to attract additional funds, accessing brokered deposits, or selling securities available-for-sale or certain types of loans.

Other short-term borrowings of $147.8 million at March 31, 2025 consisted of repurchase agreements or overnight sweep checking accounts for large commercial customers. Other short-term borrowings may also include federal funds purchased using the Federal Reserve's discount window or lines of credit with third party banks noted above. The overnight sweep checking accounts require U.S. Government securities to be pledged equal to or greater than the average deposit balance in the related customer accounts.

The principal sources of parent company liquidity are dividends from the Bank and $144.2 million in cash and investments on hand. There are various legal limitations under federal and state laws that limit the payment of dividends from the Bank to the parent company. As of March 31, 2025, under FDIC and State of West Virginia regulations, Wesbanco could receive, without prior regulatory approval, dividends of approximately $312.7 million from the Bank. Management believes these are appropriate levels of cash for the parent company given the current environment. Management continuously monitors the adequacy of parent company cash levels and sources of liquidity through the use of metrics that relate current cash levels to historical and forecasted cash inflows and outflows.

Wesbanco had outstanding commitments to extend credit in the ordinary course of business approximating $6.3 billion and $4.5 billion at March 31, 2025 and December 31, 2024, respectively. On a historical basis, only a portion of these commitments will result in an outflow of funds. Please refer to Note 13, “Commitments and Contingent Liabilities” of the Consolidated Financial Statements and the “Loans and Credit Risk” section of this MD&A for additional information.

Federal financial regulatory agencies have previously issued guidance to provide for sound practices for managing funding and liquidity risk and strengthening liquidity risk management practices. Wesbanco maintains a comprehensive management process for identifying, measuring, monitoring, and controlling liquidity risk, which is fully integrated into its risk management process. Management believes Wesbanco has sufficient current liquidity to meet current obligations to borrowers, depositors and others and that Wesbanco’s current liquidity risk management policies and procedures, as periodically reviewed and adjusted, adequately address this guidance.

The disclosures set forth in this item are qualified by the section captioned “Forward-Looking Statements” included in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.

MARKET RISK

The primary objective of Wesbanco’s ALCO with direct oversight from the BOD is to maximize net interest income within established policy parameters. This objective is accomplished through the management of balance sheet composition and duration, market risk exposures arising from changing economic conditions as well as liquidity risk.

Market risk is defined as the risk of loss due to adverse changes in the fair value of financial instruments resulting from fluctuations in interest rates and bond prices. Management considers interest rate risk to be Wesbanco’s most significant market risk. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. The consistency of Wesbanco’s net interest income is largely dependent on effective management of Wesbanco's interest rate risk profile. As interest rates change in the market, rates earned on interest rate-sensitive assets and rates paid on interest rate-sensitive liabilities do not necessarily move concurrently. Differing rate sensitivities may arise because fixed rate assets and liabilities may not have the same maturities, because variable rate assets and liabilities differ in the timing and/or the magnitude of rate changes, or due to the shape of the yield curve shifting over time.

Wesbanco’s ALCO is an executive management committee with Board representation, responsible for monitoring and managing interest rate risk within approved policy limits, utilizing earnings sensitivity simulation and economic value of equity ("EVE") models. These models are highly dependent on various assumptions, which change regularly as the balance sheet composition and market interest rates change. The key assumptions and strategies employed are analyzed, reviewed and documented at least quarterly by the ALCO as well as provided to the Board.

The earnings sensitivity simulation model projects changes in net interest income resulting from the effects of changes in interest rates. Forecasting changes in net interest income requires management to make certain assumptions regarding loan and security prepayment rates, call dates, changes to deposit product betas and non-maturity deposit decay rates, which may not necessarily reflect the manner in which actual cash flows, yields, and costs respond to changes in market interest rates. Assumptions are based on internally-developed models derived from institution specific data, current market rates and economic forecasts, and are internally back-tested and periodically reviewed by an independent third-party consultant. Key assumptions are reviewed quarterly and updated as deemed appropriate by management. No material assumption changes were made by management this period. The net interest income sensitivity results presented in Table 1, “Net Interest Income Sensitivity,” assumes that the balance sheet composition of interest sensitive assets and liabilities existing at the end of the period remains constant over the period being measured (otherwise known as a "static" balance sheet) and also assumes that a particular change in interest rates is reflected immediately and parallel across all tenors of the yield curve, regardless of the duration of the maturity or re-pricing of specific assets and liabilities. Since the assumptions used in the model relative to changes in interest rates are uncertain, the simulation analysis may not be indicative of actual results, particularly in times of stress. In addition, this analysis does not consider actions that management might employ in the future in response to changes in interest rates, as well as changes in earning asset and costing liability balances.

Interest rate risk policy limits are determined by measuring the anticipated change in net interest income over a twelve-month period, assuming immediate and sustained market interest rate increases and decreases of 100 - 400 basis points across the entire yield curve, as compared to a flat rate environment or base model. Wesbanco’s current policy limits this exposure for the noted interest rate changes to a reduction of between 7.5% - 20%, or less, of net interest income from the stable rate base model over a twelve-month period. The table below indicates Wesbanco’s interest rate sensitivity at March 31, 2025 and December 31, 2024, assuming the above-noted interest rate changes, as compared to a base model.

TABLE 1. NET INTEREST INCOME SENSITIVITY

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Net interest income sensitivity changes are primarily due to the impact of incorporating legacy PFC acquired balance sheet into the interest rate risk framework, in addition to the current rate and yield curve environment on base case net interest income and the related calculation of immediate parallel rate shock changes in rising and falling rate scenarios. Additional differences typically result from changes in the various earning assets and costing liabilities mix and growth rates, as well as periodic updates of various modeling assumptions. Generally, weighted average interest bearing non-maturity deposit betas utilized in modeling are 30% in up shocks and 40% in down shocks as the banking industry continues to remain in a high interest rate environment where funding cost pressures have persisted. Deposit betas, decay rates and loan prepayment speeds are adjusted periodically, but no less than annually in our models for non-maturity deposits and loans. Indicated model asset sensitivity in rising rate scenarios may be less than anticipated due to slower prepayment speeds, rate floors, below forecast loan yields, spread compression between new asset yields and funding costs, customer requests for negotiated rates, mortgage-related extension risk and other factors. In a decreasing rate environment, asset sensitivity may have greater impact on the margin than currently modeled as prepayment speeds increase, customers refinance or request rate reductions on existing loans, estimated deposit betas do not perform as modeled, or for other reasons not listed.

In addition to the aforementioned parallel rate shock earnings sensitivity simulation model, the ALCO also reviews a “dynamic” forecast scenario to project Wesbanco's "most likely" net interest income over a rolling two-year time period. This forecast is updated at least quarterly, incorporating revisions and updated assumptions into the model for estimated loan and deposit growth, expected balance sheet re-mixing strategies, changes in forecasted interest rates for various indices and yield curves, competitive market spreads for various products and other assumptions not listed. Such modeling is directionally consistent with typical parallel rate shock scenarios, and it assists in predicting changes in forecasted outcomes and potential adjustments to management plans to assist in achieving earnings goals.

Wesbanco also periodically measures the EVE, which is defined as the market value of tangible equity in various rate scenarios. Generally, changes in the EVE relate to changes in various assets and liabilities, changes in the yield curve, as well as changes in loan prepayment speeds and deposit decay rates. The following table presents these results and Wesbanco’s policy limits as of March 31, 2025 and December 31, 2024. Changes in EVE sensitivity since year-end 2024 relate to incorporating legacy PFC acquired balance sheet into the interest rate risk framework, in addition to the change in market interest rates and their impact upon the fair values of earning assets and costing liabilities.

The Bank has significant additional borrowing capacity with the FHLB of Pittsburgh, the Federal Reserve Bank of Cleveland and various correspondent banks, and may utilize these funding sources or interest rate swap strategies as necessary to lengthen liabilities, offset mismatches in various asset maturities and manage liquidity. CDARS® and ICS® deposits also may be utilized for similar purposes for certain customers seeking higher-yielding instruments or maintaining deposit levels below FDIC insurance limits. Significant balance sheet strategies to assist in managing the net interest margin in the current interest rate environment include:

• increasing total loans, particularly commercial and home equity loans that have variable or adjustable features;
• adjusting the percentage of sales of longer-term residential mortgage loan production into the secondary market;
• managing rates on interest bearing deposits and growing demand deposit account types to increase the relative portion of these account types to total deposits;
• employing back-to-back loan swaps for certain commercial loan customers desiring a term fixed rate loan equivalent, with the Bank receiving a variable rate;
• adjusting terms for FHLB short-term maturing borrowings to balance asset/liability mismatches; or paying them off with excess liquidity
• using CDARS® and ICS® deposit programs to manage funding needs and overall liability mix, and
• adjusting the size, mix or duration of the investment portfolio as part of liquidity and balance sheet management strategies.

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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES— Wesbanco’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that Wesbanco’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this Form 10-Q, are effective to ensure that information required to be disclosed by Wesbanco in the reports it files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to Wesbanco’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS— Wesbanco’s management, including the CEO and CFO, does not expect that Wesbanco’s disclosure controls and internal controls will prevent all errors and all fraud. While Wesbanco’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective, no control system, no matter how well conceived and operated, can provide absolute assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

CHANGES IN INTERNAL CONTROLS— There have been no changes in Wesbanco's internal control over financial reporting that occurred during our fiscal quarter ended March 31, 2025 as required to be reported by paragraph (d) of Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.