Participants

John Iannone; Senior Vice President, Investor and Public Relations; WesBanco Inc

Jeffrey Jackson; President, Chief Executive Officer, Director; WesBanco Inc

Daniel Weiss; Chief Financial Officer, Executive Vice President; WesBanco Inc

Andrew Liesch; Analyst; Piper Sandler

Catherine Mealor; Analyst; KBW

Daniel Tamayo; Analyst; Raymond James

Russell Gunther; Analyst; Stephens

Manuel Navas; Analyst; D.A. Davidson

Karl Shepherd; Analyst; RBC Capital Markets

David Bishop

Presentation

Operator

Good morning everyone and welcome to the WesBanco Inc of first quarter 2025 earnings conference call.
All participants will be in a listen-only mode. Should you need assistance, please send to a conference specialist by pressing the star key followed by 0.
After today's presentation, there will be an opportunity to ask questions. To ask a question you may press star and then 1, to withdraw your questions, you may press star and 2.
Please also note, today's event is being recorded.
I would now like to turn the conference call over to John Iannone, Senior Vice President, Investor Relations. Please go ahead.

John Iannone

Thank you. Good morning and welcome to WesBanco Inc first quarter 2025 earnings conference call.
Leading the call today are Jeff Jackson, President and Chief Executive Officer, and Dan Weiss, Senior Executive Vice President and Chief Financial Officer.
Today's call, an archive of which will be available on our website for one year, contains forward-looking information.
Cautionary statements about this information and reconciliations of non GAAP measures are included in our earnings related materials issued yesterday afternoon.
As well as our other SEC filings and investor materials.
These materials are available on the investor relations section of our website, wesbanco.com
All statements speak only as of April 30th, 2025, and WesBanco it undertakes no obligation to update them.
I would now like to turn the call over to Jeff. Jeff?

Jeffrey Jackson

Thanks, John, and good morning.
On today's call, we will review our acquisition of Premiere Financial.
And our strong 1st quarter results. As well as provide an update on our outlook for 2025.
Key takeaways from the call today are successful completion of our acquisition of Premiere.
Improved net interest margin, which is expected to continue to improve through 2025.
Strong organic loan growth that was fully funded by organic deposit growth.
Our first quarter results demonstrate continued solid operational performance as we again delivered strong organic loan and deposit growth while driving positive operating leverage.
We also continue to strengthen our balance sheet and net interest margin by funding loan growth with deposits and reducing higher cost borrowings.
For the quarter ending March 31, 2025, we reported net income excluding merger and restructuring expenses and the day one provision on acquired loans of $51.2 million and diluted earnings per share of $0.66.
Which is, which increased 18% year over year, despite significantly higher shares outstanding from the PFC acquisition.
On a similar basis, our first quarter returns on average assets and tangible equity improved year over year to approximately 1% and 12% respectively.
Reflecting our focus on organic growth and positive operating leverage combined with the benefits of the premier acquisition, our net interest margin increased to 3.35% and our efficiency ratio improved to 58.62%. This quarter's key story was the successful acquisition of Premier Financial, elevating us into the ranks of the Top 100 largest US banks by asset size.
This strategic merger expands and strengthens our market position and accelerates our long-term growth strategy. We are pleased to welcome Premier's talented team, loyal customers, and strong community partners to WesBanco.
We've retained nearly 90% of the premier employees, and the response to our merger has been overwhelmingly positive, both in our communities and our teams.
I've already seen great examples of collaboration sparking new growth opportunities, and I look forward to sharing the results with you in months ahead.
As we move forward together, our teams are focused on executing seamless integration and delivering on the full potential of the combined organization for all stakeholders.
The strength of our strategies and teams are reflected in our performance with organic total and com commercial loan growth and organic deposit growth continuing to significantly outperform the monthly HA data for all domestically chartered commercial banks on both a year over year and quarter over quarter basis.
For the first quarter, total deposits organically increased $922 million year over year and $285 million quarter over quarter to more than $14.4 billion.
Importantly, this growth was driven by deposit categories other than certificate of deposits, as organic deposit growth excluding CDs was 5% year over year and nearly 11% quarter over quarter annualized.
Further, deposit growth again fully funded our total organic loan growth. While there could be fluctuations quarter to quarter, our plan is to still to fund full year loan growth with deposits.
First quarter organic loan growth was 8% year over year and 4% quarter over quarter annualized, driven by the strong performance of our banking teams across our markets.
Total commercial loans organically increased 10% year over year and almost 7% sequentially on an annualized basis driven by commercial real estate.
Our commercial loan pipeline as of March 31st, was approximately $1.3 billion with more than 25% attributable to Premier.
Reflecting our strong organic growth engine, WesBanco's stand-alone pipeline at March 31st improved approximately 18% from year end.
In the three weeks since quarter end, the commercial pipeline has grown approximately $100 million to $1.4 billion.
Based on the current loan pipeline, we continue to expect mid-single digit loan growth during 2025.
This continued growth is made possible by the strength of our markets and lending teams who are working across business lines to meet customers' needs and drive growth.
One example highlights a collaborative effort across commercial products, treasury management, and private banking to deliver a tailored solution and secure a significant win with an Ohio customer.
Consistent with our mission. The team tailored a loan structure to meet the customer's unique needs, closing a $50 million dollar loan and securing $45 million in deposits and a $1 million dollar fee income item.
As well as significant near-term treasury management and private banking opportunities. Turning briefly to the macroeconomic environment.
The equity markets are extremely volatile right now, reflecting the threat of trade wars due to constant fluctuations in tariff pro announcements.
While these pronouncements are likely negotiating tactics, the eventual outcome of trade negotiations remain unclear.
And it is too early to accurately gauge potential impacts, if any. However, the benefit of our loan portfolio is its variety and granularity spread across our economically diverse nine-state footprint, which provides soundness and stability if an industry or region is struggling.
Roughly 17% of our total portfolio is in our mid-Atlantic region, with roughly a third of that residential-related, and it spans our footprint across the state of Maryland.
In fact, the percentage of this that falls within the DCMSA is less than 0.7%. With roughly half of that residential. Further, we do not have a government contractor line of business, and our total office investment portfolio is less than 4% of our total loan portfolio and has solid loan to value and DSC ratios.
We're staying close to our customers and continually monitoring our portfolios to proactively manage risk and help our customers navigate evolving market dynamics.
I would now like to turn the call over to Daniel Weiss, our CFO, for details on our first quarter financial results and our current outlook for 2025. Dan.

Daniel Weiss

Thanks, Jeff, and good morning.
For the quarter ending March 301, 2025, we reported GAAP net income available to common shareholders of negative 11.5 million or $0.15 per share. When excluding the day one provision for credit losses and merger-related expenses from the premier acquisition, that income was $51.2 million or $0.66 per share, representing an increase of 54% from $33.2 million or $0.56 per share in the prior year period.
To highlight a few of the first quarter's accomplishments, we successfully closed our acquisition of Premier Financial, generated strong year over year pre-tax, pre-provision earnings growth of 25%.
Grew both loans and deposits organically, improved the net interest margin, and reduced the efficiency ratio. We also restructured the premier balance sheet through a securities restructuring, unwound the macro hedges, paid down higher costs brokered deposits, remain on pace to exit $140 million of commercial loans during the second quarter.
And remain on track to exit the mortgage servicing business in the coming months.
So we're excited about the opportunities that lie ahead and pleased with the success of our strategies playing out according to our plan.
Our balance sheet as of March 3 1 reflects the benefits of both the premier acquired balance sheet and organic growth. Total assets increased 54% year over year to $27.4 billion which included total portfolio loans of $18.7 billion total securities of $4.3 billion and the addition of approximately $480 million in goodwill generated from the acquisition.
Total portfolio loans increased 57.3%, reflecting $5.9 billion from Premier and $921 million from organic growth, which, as Jeff mentioned, was driven by strong performance by our banking teams across our markets.
We remain optimistic about future loan growth with our strong pipelines, banking teams, and markets combined with more than $1 billion in unfunded land construction and development commitments expected to fund over the next 18 months.
During March, we sold approximately $775 million of Premier securities and purchased $475 million of higher coupon fixed rate securities and used the excess proceeds to pay down higher cost borrowings, which provided immediate benefit to the first quarter net interest margin.
Deposits of $21.3 billion increased 58% versus the prior year due to premier deposits of $6.9 billion and organic growth of $922 million.
Our organic deposit growth fully funded loan growth on both a year over year and sequential quarter basis.
Further, without excluding CDs, we realized organic deposit growth of 4.8% year over year and 10.6% quarter over quarter annualized.
Credit quality continues to remain stable as key metrics have remained low from a historical perspective and within a consistent range in the last five years. The first quarter provision for credit losses was $69 million with $59 million related to the day one non-PCD provision.
The allowance for credit losses was $234 million at March 31st, which increased the coverage ratio to 1.25% from 1.10% as of December 31st, 2024.
The first quarter margin of 3.35% improved 32 basis points compared to the fourth quarter and 43 basis points on a year to year basis through a combination of higher loan and securities yields, lower funding costs, and purchase accounting accretion.
Interest rate mark accretion from the premier acquisition, in addition to the securities restructuring, benefited the first quarter net interest margin by approximately 25 basis points.
Deposit funding costs of 255 basis points for the first quarter decreased as compared to 271 basis points in the fourth quarter of 2024 and 256 basis points in the prior year period.
When including non-interest bearing deposits, deposit funding costs for the first quarter were 188 basis points.
In conjunction with the closing of our acquisition of Premier, interest accretion added approximately $8.4 million to net interest income in the first quarter, mostly from loan accretion of $6.2 million as well as $1.9 million from CDs.
The PCD book totalled $220 million with an interest mark of 4.3% and credit mark of roughly $30 million.
$6 billion in premier loans were identified as non-PCD with an interest mark of $270 million representing approximately 4.5% and a credit mark of roughly $60 million representing a 1% credit mark, both of which will be increased to income over the life of the portfolio.
The interest mark on CDs was $11 million with the majority to accrete over the next 9 to 12 months, and interest marks on other borrowings were relatively small.
For the first quarter, non-interest income totalled $34.7 million a 13% increase for the prior year period due primarily to the premier acquisition. Net swap fee and valuation income was down due to fair market value adjustments from recent rate volatility. However, gross swap fees increased $1.2 million year over year to $2 million.
Non-interest expense, excluding restructuring of merger-related costs for the three months ended March 31, 2025 was $114 million an increase of 17.2% year over year due to the addition of Premier's expense base and higher amortization of intangible assets.
Equipment and software expense of $13.1 million includes the additional cost of operating two core systems until conversion to one platform in midday. Amortization of intangible assets of $4.2 million increased 2.1 million year over year due to the core deposit and tangible asset that was created from the Premier acquisition, excluding the impacts of from the addition of Premier, our legacy cost base was roughly flat to the fourth quarter.
Turning to capital, our regulatory ratios remain above the applicable well capitalized standards in conjunction with the February 28 closing of the Premier Financial acquisition, we converted all of Premier's outstanding common shares into $28.7 million West Vanco shares, which increased total capital by $1 billion and as anticipated, modestly impacted our capital ratios.
It's also worth noting here that under the regulatory definition for the calculation of the leverage ratio, period in capital is divided by average assets, which included just one month of Premier's balance sheet. Therefore, the reported ratio of 11.11% is expected to come down into the high 8% range on a full quarter basis.
Turning to our current outlook for the remainder of 2025, which includes the benefits from our acquisition of Premiere, we are currently modelling 225 basis point Fed rate cuts in June and September. However, given our relatively neutral rate sensitive position, we do not expect a meaningful impact for our net interest margin from these cuts. We anticipate approximately 2/3 of our $3 billion CD book to mature or reprice lower over the next six months with an average interest rate of 3.9% as compared to our current 7-month CD rate of 3.5%. We anticipate premier related accretion during the 2nd quarter to add approximately 15 to 20 basis points to the 1st quarter margin.
And therefore expect to break through a 3.50% margin during the second quarter.
Nearly all fee income categories will be positively impacted by the premier acquisition, and as a reminder, first quarter trust fees include tax preparation fees totalling roughly $700,000. Excluding these fees, trust fees, as well as securities brokerage revenue for the remainder of the year should be modestly higher in future quarters, reflecting modest organic growth and the benefit of our new markets and newly acquired assets under management.
Electronic banking fees and service charges on deposit, which are subject to overall consumer spending behaviours, should increase from the first quarter, reflecting the addition of Premier's markets, despite the Durbin amendment impact expected to be $1 million per quarter from Premier's historical run rate.
Mortgage banking income should improve modestly, reflecting the opportunities in our new markets, but will continue to be impacted by the overall residential housing market and economic trends and interest rates.
And finally, gross commercial swap fee income excluding market adjustments should be in a similar range to the first quarter. As we've stated in the past, we remain focused on delivering discipline, expense management to drive positive operating leverage, and we'll continue our efforts throughout 2025.
During the 2nd quarter we'll be operating 2 core systems and have a higher staffing level as planned to facilitate our core system conversion in mid-May, which will drive a slightly higher expense base before the remaining cost saves are realized and fully reflected in the 3rd quarter run rate.
With Premier's core deposit intangible of $151.5 million representing 3.28% of core deposits, amortization of intangible assets is expected to be roughly $9 million per quarter, up from the $4 million reported in the first quarter as we realize the full quarter impact of the amortization of the intangible asset created from the premier acquisition.
We believe the temporary costs of preparing for the core system conversion during the 2nd quarter will be similar to our anticipated mid-year merit increase and therefore most of the 26% cost savings should be reflected in the 3rd quarter and we expect the expense run rate will be in the. $140 million dollar range for the remaining quarters of 2025, which reflects legacy WesBanco owes $100 million dollar cost base, the addition of Premier's cost base after cost savings, mid-year merit increases, and the higher intangible amortization.
The provision for credit losses will depend upon changes to the macroeconomic forecast and qualitative factors, as well as various credit quality metrics including potential charge offs, criticizing and classified loan balances, delinquencies, changes in pre-payment speeds and future loan growth, and lastly, our anticipated full year effective tax rate. It is expected to be between 19 and 19.5% subject to changes in tax regulations and taxable income levels. This increase from last quarter is due to non-deductible costs related to the premier acquisition.
We further expect the bulk of the remaining merger related expenses totalling approximately $45 million to be recognized in the second quarter as contract terminations, severance, and retention bonuses mostly occurred then.
Operator, we're now ready to take questions. Would you please review the instructions?

Question and Answer Session

Operator

Ladies and gentlemen, at this time we'll begin the question-and-answer session. To ask a question, you may press star and then one on your touch tone phones. If you are using a speakerphone, we do ask that you please pick up your hands prior to pressing the keys.
We do ask that you please limit yourselves to one question and a single follow up.
To withdraw your questions you may press star and 2.
Again that is star and then one to join the question queue.
Our first question today comes from Andrew Leich from Piper Sandler. Please go ahead with your question.

Andrew Liesch

Thanks. Good morning.
Guys. On the margins looking forward here, appreciate the commentary with the addition and the accretion from Premiere. But, on an organic basis, how do you think it can perform absent rate cuts? It looked like it, that loan yield on new production was up a little bit, and maybe there's an opportunity to reduce funding costs with the CDs, but how should we be looking at the margin for more on an organic Basis?

Daniel Weiss

Yeah Andrew I'll take that one, similar to what we discussed last quarter on a kind of organic legacy basis we anticipate roughly 4 to 6 basis points of margin improvement per quarter.
You know with Premiere in in the fold representing about a third of the overall balance sheet, I might call that maybe it's 3 to 5 basis points or 2 to 4 basis points of legacy improvement and all for the reasons that that we kind of discussed last quarter as well obviously as we talked CDs repricing downward, certainly we are anticipating right now Fed cut in June.
That would have an impact both on the federal home loan bank borrowings, most of which are one month advances, currently right around 4.5%. Those would reprice down immediately, as would our variable rate commercial loans and securities. So, a couple of things that we did do, and we you know we talked about the securities restructuring a little bit.
But one of the things that we would anticipate, that's outside, well, even outside of the restructuring, we did, as we said in the past have been evaluating our floating rate securities book. This is West Bank is floating rate securities book representing about 16% of the overall securities.
In the quarter in February we did sell about 100 million. At a, these are floating rate securities at about a $40,000 gain. The yield on those was about 494 4.94%. We reinvested that $100 million and, got a book yield of about 5.5%, and only picked up about 4 tens of a year in duration. So that also should be kind of part of that, I would say tailwind towards margin expansion on an organic.

Andrew Liesch

Got it. All right, that's helpful, thanks. And then that $140 million dollar expense number, it sounds like the cost saves from the deal are on track or maybe even a little bit ahead of schedule, but just some clarity, is that $140 million for the third quarter and the 4th quarter, or is there still going to be some legacy cost before they're all realized to the $140 number is a better number for the 4th quarter.

Daniel Weiss

Yeah, no, I would say it's.
It's right now we're modelling in that low 140 range, for each of the next three quarters, and again, it, it's obviously second quarter, is really due to, the combined, course, the, all of the cost saves haven't been taken out, won't expect to be taken out really until June 30th fully. We do have a little bit of spill over into the third quarter, our trust conversion, our security brokerage, conversion, and some of our, MSR assets, are likely to be still.
Service for a short period of time in the 3rd quarter, so there might be a little bit of additional kind of duplication of cost there but for the most part, we expect to see that, 26% fully baked in in the 4th quarter for sure and mostly baked in in the 3rd quarter and as you know there were some cost saves on the salaries and wages front here. And, effective February 28th, with some folks leaving on, kind of legal day one.

Andrew Liesch

Right. Great, thank you for that clarity. I'll step back.

Operator

Our next question comes from Catherine Mealor from KBW. Please go ahead with your question.

Catherine Mealor

Thanks. Good morning.

Jeffrey Jackson

Hey, good morning. Good morning.

Catherine Mealor

Oh, I wanted to dig a little bit into the margins just a couple of lines if you don't mind.
Maybe just the first on the bond book. Do you have, I know there's a lot of moving parts, is there any way for you to disclose where your bond yields were maybe at quarter end when we get the kind of full impact of the bound restructure maybe kind of where we're starting this quarter.

Daniel Weiss

Yeah, so, what I would tell you is specific to the restructure, as we said sold $775 million and if we think about, that those securities were yielding about 3% on Premier's books. The markup was about 4% which was up to 4.86% on those sold. We reinvested, as we said, $475 million at a yield of about 45, excuse me, 5.43%. So we picked up 57 basis points, kind of on that reinvestment, focused on mortgage backed and CMOs, to improve pledgeability certainly, and as AFS.
But I would tell you that if we look at, kind of spot securities yield at the end of March. It's right around 307.
So hopefully you know Catherine that kind of helps to explain you know where we're at.

Catherine Mealor

Yeah that's yeah that's great that's great. Okay, that's perfect and then and then on the deposit side.
I know Premier had a higher deposit base than you did, but, and we only have a partial quarter. So is it fair to assume that deposit costs actually increase next quarter once we kind of get the full impact, or are we still kind of stable in deposit costs relative to the quarter we've seen at that 188 level?

Daniel Weiss

Yeah, no, I think that we do see some, continued reduction, in deposit costs for, certainly on the CD front is kind of we've talked about in the past, at this point we have implemented our, pricing of deposits, that's been fully implemented at Premier. And so we think that you know we can, we're going to be patient, certainly with the deposits there, but, we do think that we're going to see some improvement in overall funding costs here, maybe in the 10 basis point range coming off of first quarter.

Catherine Mealor

Okay, great.
And then I'm going to go back up, oh, actually. I'm just going to kind of hit a couple lines hopefully I'm not going to ask any questions and then on FHL I know you've got a billing for coming off an FHLB.
Do you expect to shrink the balance sheet by that amount or just reinvest it into lower yielding of HLV?

Daniel Weiss

Yeah, I would say it's going to be the, at this point, the shrinkage of the balance sheet is really dependent upon a couple of things. First, we're obviously monitoring the securities book we did shrink that somewhat. It represents about 16% right now of total assets.
That's on kind of I would say the lower end of the range for where we want to be to maintain, the what we bill or, appropriate levels of liquidity to maintain pledging for our public funds and such, so, I don't see us necessarily shrinking that. I would tell you though, we are holding a little more cash than you know what we have historically we Try to target around 2.5% of total assets to 3%.
At the at the period end we're holding about 4%, so you know we could see 100 million or so potentially reduction in FHL be there, but generally speaking, the expectation is we would continue to fund our loan growth, with deposit growth and FHLB borrowings would generally kind of fill in any gaps there, but we would maintain. The securities book to be about 16 to 17% of the overall balance sheet cash or right around 3%.

Catherine Mealor

Okay, that's great. And then if I could just round up the margin questions going back up to loans in your comment you said that you expect fair value accretion to be 15 to 20 basis points over the first quarter, so that's not 15 to 20 basis points of fair value accretion that's increased from the first quarter.

Daniel Weiss

That's exactly right, Catherine. That's a build of 15 to 20 basis points on the 3.35% that we reported here in the first quarter.

Catherine Mealor

Okay great and so then all that together you're saying you're going to go through the 350 margin.
How conservative do you feel with that number because Feel like you're higher than that

Daniel Weiss

I'm giving you the bottom end, not the top end.

Catherine Mealor

Yeah. Because I'm, oh yeah, I'm getting high when I put all that together it's a bigger number, so that, so you're very conservative with that 350.
Yeah, I think so. Okay, alright, great, awesome thank you for all for letting me ask all the questions. I appreciate it.

Operator

Our next question comes from Daniel Tamayo from Raymond James. Please go ahead with your question.

Daniel Tamayo

Thank you, good morning, guys.

Daniel Weiss

Hey, good morning, Dan. Good morning.

Daniel Tamayo

So We've hit the margin a lot. Appreciate all that guidance there. We talked a little bit about the balance sheet, but maybe we could dig in just a little bit more to Try and put a finer point on where net interest income might end up this year.
So I, I'll ask you directly if you have any comments on what you think net interest income numbers could look like for the rest of the year. If not, or in addition, if you. To kind of size for us how you're thinking about just absolute balances on the asset side going forward given all the moving parts you've talked about with FHLB and the securities restructurings and loan growth obviously baked in. So just curious how in your mind or budget, how you think the size of the assets and or net interest income could move the rest of the year.

Daniel Weiss

Yeah, I would say, and we certainly anticipate still that, mid to upper single digit loan growth, and that to be fully funded with deposits so that kind of and I've already talked about kind of the other levers on the balance sheet and what the percentages would be so I think that kind of helps guide what we would be expecting for the balance sheet by the end of the year as it relates to, net interest income.
We typically it wouldn't give a whole lot of, deep guidance here, but what I can tell you, and I think this should help, clear up at least some parts of this is, the accretion that we are anticipating as a result, of the, premier deal, I can give that, and these are kind of rough estimates at this point we're still finalizing our purchase accounting.
But you know we talked about the overall interest mark on the non-PCD book is roughly $270 million. That's a 4.5%-mark, credit mark which is also would be, accreted through interest income is right around $60 million so that's, 1% roughly.
And overall, including the PCD book as well we still have about a 4.5% interest mark and about a 1.6% credit mark. And of course, some of that on the PCD side it would not be accretable, but if we think about the accretion, the breakdown here that we're showing today, and this could fluctuate again based on pre-payment speed in the future, etc. Is right around $59 million here and this is for loans.
In the 2025, around 60 million in 2026, 50 million in 2027, again this is going to be very much subject to, additional review and very much dependent on interest rates, in the future as that would influence prepayment speeds. So, we do have some prepayment speed assumptions baked into this. But that's kind of, what we see today based on everything, that. We know.

Daniel Tamayo

Okay, that's very helpful, Dan. I appreciate it. Maybe switching gears here, we haven't talked about credit in the question section at least yet, and everything looked pretty good. I guess there was a, somewhat of an increase in the criticized loans in the quarter. I'm assuming that's from the acquisition, maybe you could give a little colour around the increase there and if you have any thoughts on.
Kind of go forward, charge off expectations and or, provision, however you want to guide us in terms of how we should think about that.

Jeffrey Jackson

Yeah, I can start, no, I think most of that CNC is just normal course of business related to the career acquisition as well as just our, how we're seeing things today. I think if you look at the provision, it was up a lot of that was due to, obviously the acquisition we also.
Did have one credit that we took a larger provision on but I feel very good about that working through that the rest of the year so I would say overall we still feel very good about our credit metrics we still feel like we're going to be better than our peer group, better than the industry, and at this point we're not really seeing any sort of outs outside risk in any sort of market, as I mentioned in my earlier comments.
We have very limited exposure to the DC market, specifically, and so feel good about that, as well as obviously having a nine-state footprint, we have a very diverse portfolio. So I would say I think, where we're at obviously will fluctuate quarter to quarter, but we feel very good, with the range we're in today.

Daniel Tamayo

Okay, in terms of, kind of recent net charge off activity is that's what you're referring to?

Jeffrey Jackson

Yes.

Daniel Tamayo

Got it. Okay, alright, thanks for taking my questions guys.

Operator

Yes.
Our next question comes from Russell Gunther from Stevens. Please go ahead with your question.

Russell Gunther

Hey, good morning, guys. Good.

Jeffrey Jackson

Morning, Russell. Good.

Russell Gunther

Morning. Wanted to follow up on the expenses. First to just confirm that the 40 run rate provided is fully inclusive of all deal related cost saves and then to inquire about how we should think about a normalized growth rate from there.

Daniel Weiss

Yeah, Russell, I would say that, yeah, 4th quarter, the 4 run rate would be inclusive of all of all cost saves certainly, like we said in the, low 140 range, and I would, anticipate, probably a 4%, call it 4% build off of there as we look towards, 26% and.
Beyond.
Okay great thanks.

Russell Gunther

And then just my second question would be on capital. So with CET1 around 10%, how are you guys thinking about managing this ratio going forward and what does that suggest for capital deployment beyond loan growth, specifically any appetite for buybacks or M&A.

Daniel Weiss

Yeah, I would say today we're in, capital, build mode, for the next several quarters, and, in terms of capital deployment, how we might deploy that through M&A or buyback I'll maybe defer to Jeff.

Jeffrey Jackson

Yeah, as Dan said, we're still building back the capital, obviously, we need to digest this transaction. We're going to have conversion coming up in a few weeks. We expect that to go really well, and then, if we were ever to, look to announce or another deal, it'd probably be way into this year, early 1st quarter, 2nd quarter at this point. We're really focused on getting Premier, squared away, making sure everything's running very smoothly, and, then, taking it from there, but, that we're in no hurry to do another deal or, I would say at this point we're just trying to build back capital.
Hopefully that answers your question.

Russell Gunther

Yes guys, thank you both for taking my question.

Operator

Our next question comes from Manuel Navas from D.A. Davidson. Please go ahead with your question.

Manuel Navas

Hey, can I just clarify the n a little bit, so PAA gets you to that 350 to 355 range next year and then you have, just organic legacy, improvement, and there were two ranges is it 3 to 5 base points on top or is it 4 to 6 basis points on top potentially?

Daniel Weiss

Yeah, but yeah well I would say I would say 3 to 5 so the 4 to 6 was what we disclosed last quarter. For West Bank of legacy, so if we think about, obviously the purchase accounting accretion and marking Premier's balance sheet which represents roughly a third of our assets and, in interest income, I would, I would just say, we, you have to kind of count is basically 2/3 of the 4 to 6, which is, I would say kind of more 3 to 5 would be additive.

Manuel Navas

Okay, I appreciate that and can you add a little bit more colour on any balance sheet.
Items that that still need to be done. I know you're going to; there's a couple of loan sales that that that should come through next quarter, anything else that's still to come into maybe is there any more securities restructuring that you're going to do? Is that kind of all done with that spot rate you gave? Like is there anything left to come on the. Balance sheet next this this coming quarter.

Daniel Weiss

Yeah, I think you know securities is pretty well done, certainly we've got the loan sale, about $140 million that could be sold, we have roughly, that marked down to about 100.
Certainly the MSR business is something else that that is expected to kind of close out over the next several months probably will kind of wrap that completely up here in the early in the third quarter, but no I think that really covers the majority of the of the balance sheet restructuring. I mean we certainly do have, later in the year. Our preferred stock does become callable and so we'll be evaluating that along with, some of the sub debt that we acquired from Premier to kind of essentially refinancing that to take advantage of some savings there but nothing, nothing. Significant outside of.

Manuel Navas

That Kind of shifting direction a little bit, can you talk about the puts and takes in the loan growth outlook, the pipeline is strong.
What are your expectations for pull through? Have there been any kind of shifts or delays in in your in your customer base with pull throughs? Has there been any uptick in, payoff activity since the end of the first quarter and some discussion on the different regions like which ones are doing well, which ones could do better, and just kind of, a little bit more on the puts and takes behind your loan growth.

Jeffrey Jackson

Sure. So, as I mentioned, our pipelines continue to grow, they're combined, I believe it's about 1.4 billion, and that's pretty solid pipeline, so there's obviously other stuff beyond that. I would say as far as pull through, we're still seeing customers do a lot of business.
We have seen a few things pull back due to tariffs just waiting to see, but overall I feel very good about the loan growth, that mid-single digit to potentially upper single digit loan growth. If you look at the kind of the markets that are doing really well from a pipeline perspective, I do know our LPOs continue. To be, I believe, 20 to 25% of the pipeline of legacy WesBanco with Chattanooga and Nashville and Indianapolis showing really strong growth there. The whole state of Ohio, obviously with the addition of Premier, we are getting a lot more opportunities to pull through there and then we are seeing good pipelines over in the mid-Atlantic region also.
So overall I would say it looks very similar to last year with the addition to Premier we should see more I would say more CNI pipeline because that franchise and that mark those markets tend to lean more CNI, which is good for us, and we are seeing more opportunities there that we're able to capitalize on.
So, once again, overall, we feel very good about mid to upper single digits, as far as loan growth, I have not seen any slowdown as far as pull through, once again, a few customers, few things due to tariffs, but overall I think it's still unknown the impacts there.

Manuel Navas

I appreciate that and the deposit growth has been excellent and are the pipelines similar on that side of the house and how much of that is coming from the commercial teams themselves and I'll step back into the queue.

Jeffrey Jackson

Yes, we had a very good first quarter in deposits. I would expect this year to look very similar to last year, as it relates to deposits. So, as you remember, we grew deposits, in the first quarter last year, we grew them this year, that looked really good. In the 2nd quarter, you do have tax time, so you do see typically a little bit of a dip and then it builds back toward the end of the 2nd quarter, but, I would say the deposit pipeline still look very good as well, and a lot of it is commercial, we do have some.
Some really good opportunities ahead of us, also on the treasury management side too, I do believe we have a lot of new card and TM products in place too that we hope to build over the next several quarters, our revenue there as well.

Manuel Navas

Thank you.
Thank you for coming to.

Jeffrey Jackson

Thank you.

Operator

Our next question comes from Karl Shepherd from RBC Capital Markets. Please go ahead with your question.

Karl Shepherd

Hey, good morning, guys.

Jeffrey Jackson

Hey, good morning, Carl.

Daniel Weiss

Good morning, Carl.

Karl Shepherd

I got a few ones for you. On capital. I think the message you're trying to send is you have ample capital for all the organic growth you want to do, but just kind of waiting to build back to more normalized level. Is that fair?

Daniel Weiss

Yeah.

Karl Shepherd

Okay, and then a deal announcement we talked a little about a little bit about CRE concentration. Do you just have a quick update there and ability to put CRE loans on?

Daniel Weiss

Yeah, so We calculate our CRE concentration ratio at, as a percentage of total risk based capital at the bank level, and you know at the bank level we are calculating right around 298%, which is obviously under the guideline. I know, many like to focus on total risk-based capital at the Holdco, which is, obviously significantly lower than that 298, but yeah, we're going to continue to monitor, those levels and wouldn't be, it, it'll be dependent upon kind of CRE growth here.
Quarter to quarter as it ebbs and flows, but wouldn't be, concerned if we eclipse that 300% threshold and kind of are bouncing, right around that for some period of time as we continue as we continue obviously to build back capital though, which is coming back at a pretty nice clip, though, the organic, margin as well as the accretion. We do think that that is going to continue to work its way, back downward, but we do have, typically the seasonal CRE growth occurs in 2nd and 3rd quarter, so you know we'll see where we land there.

Karl Shepherd

Okay.
The balance sheet is call it 50% larger today than it was 3 months ago. Does that change any way you think about running your business or open up any strategic opportunities, or how should we think about the way you guys are approaching that or anything that's rating around in your head?

Jeffrey Jackson

Yeah, I think it obviously gives us a bigger balance sheet to lend to our stronger customers. We're doing that right now, especially as we look at our new Premier top customers where we've already done an analysis on potential lending opportunities where we can lend more to them than say Legacy Premier has looked at in the past.
It has also given us. An opportunity to look at are there certain lines of business that maybe we wouldn't have gone into that we're doubling down on looking at to move into you know moving forward so we're looking at all those different things, Dan, I don't know if there's anything else you would have I think I think you have yeah.

Karl Shepherd

Okay, and then one last one for me, if you go back to the merger deck last summer, I think you had a pro forma of 359 of EPS for this year. With fully faith and cost savings, and I don't want to pick over line by line. Dan's done a ton of help already, but that number, it feels like it should be achievable. The accretion seems dialled in with the high mortgage book and the margins tracking a little bit better pre-closed.
Is there anything that you would steer us away from thinking about?
And that was in that deck other than what we've talked about already.

Daniel Weiss

Yeah, Carl, I, that that 359 is that I assume that's excluding merger related and probably excluding, the kind of day one double count on the provision for credit losses.

Karl Shepherd

Yes, yeah.
Yes.

Daniel Weiss

Yeah, I would say, given all of the all of the guidance that we provided that should be within the within.
Range then certainly yeah.

Karl Shepherd

Thank you both for all the help.

Operator

And our last question today comes from David Bishop from Hovde Group. Please go ahead with your question.

David Bishop

Hey, good morning, gentlemen.

Jeffrey Jackson

Hey, good morning.

David Bishop

Hey Jeff, just curious. Obviously with the, added exposure to maybe more manufacturing CI type markets. I'm sure you guys are, aware of the impact of tariffs. Just curious if you've been able to do any sort of stress testing or deep dives in terms of, the legacy from your book, in terms of, tariff exposure, maybe even the legacy with no book, maybe where you see some, I guess exposure there to increase tariffs across the commercial loan book.

Jeffrey Jackson

Yeah, we, we've taken a look at both books, obviously the premier book we've looked at multiple times pre-close and post close, and so we've gone through that.
Once again, tariffs, it's kind of an unknown right now, but we have looked at different CNI exposure and Legacy WesBanco, we were not as big in CNI. And so, but we are taking a look at the current portfolio, but I would say at this point we don't feel like we have a significant amount of exposure to the tariffs, but once again there's a lot of unknown, so I wish I could answer your question better. It's just it's a lot of unknown at this point.

David Bishop

Understood. And final question, maybe a little bit of, a guidance on the fee comes out of the house, I assume you guys will be layering your legacy swap products and such. Just curious, maybe, I don't know for like for a specific number, but maybe, percentage growth or percent of, average assets how you sort of see that trending out over the course of the year. Thanks.

Daniel Weiss

Yeah, I think we certainly see opportunities particularly you know even as you mentioned there on the swap fee income, for example, certainly.
This, the first quarter here only includes 1 month of fee income from Premier, so we would expect to see a nice bump here in the second quarter as we kind of realize the full quarter's effect of the fee income.
I would say, today and you can see the trends pretty cleanly if you compare 4th quarter to 1st quarter for the most part, with the exception of swap of net swap fee income which obviously has some negative fair value adjustments there, with the exception of Foley and with the exception of insurance, mostly the improvement that you see. Kind of 4th quarter versus 3rd quarter, is representative of about 1 month of premier.
So if you can get there by almost multiplying, the diff the delta for those areas, by 3, to get, kind of your full quarter run rate for 2nd quarter and beyond.
If that's helpful, I would just also just mentioned that just keep in mind that trust fee income does include about $700,000 in the first quarter related to, the tax prep fees that would not be, it only occurs once a quarter, once a year of the first quarter.

David Bishop

Got it got it.

Operator

And ladies and gentlemen, with that we'll conclude today's question and answer session. I'd like to turn the floor back over to Jeffrey Jackson for any closing remarks.

Jeffrey Jackson

Thank you. There's a tremendous opportunity ahead as we continue to build our future as a community-focused regional financial services organization.
Our transformational acquisition of Premiere provides enhanced scale and capabilities, while our organic growth engine continues to deliver strong loan and deposit growth.
Our stronger company, which has already begun to drive improved financial metrics, positions as well to continue to deliver shareholder value.
Thank you for joining us today and we look forward to speaking with you at one of our upcoming investor events. Have a great day. Thank you.

Operator

And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.