WSBC Q2 Deep Dive: Premier Integration Drives Growth, Margin Outlook Mixed

Regional banking company WesBanco (NASDAQ:WSBC) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 76.2% year on year to $260.7 million. Its non-GAAP profit of $0.91 per share was 6.5% above analysts’ consensus estimates.

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StockStory’s Take

WesBanco’s second quarter results surpassed Wall Street’s revenue and non-GAAP profit expectations, but the market responded negatively. Management cited the successful integration of Premier Financial as a key driver, noting substantial organic loan and deposit growth, a stronger net interest margin, and improved efficiency. CEO Jeffrey Jackson highlighted a 40% year-over-year increase in fee income, attributing it largely to both the Premier acquisition and new treasury management products. Despite these operational gains, the negative market reaction suggests investor concerns around the sustainability of recent performance and potential headwinds in expense management.

Looking ahead, WesBanco’s guidance for the remainder of 2025 centers on balancing growth initiatives with disciplined expense management. Management expects the majority of cost savings from the Premier integration to have already materialized, with future improvements hinging on organic expansion and controlled investment in new markets. CFO Daniel Weiss emphasized, “We continue to expect the expense run rate for the third quarter to be consistent with the second quarter in that low to mid-$140 million range,” while also highlighting margin pressures from CD repricing and the gradual runoff of Premier-related accretion. The company remains focused on leveraging its expanded footprint and new teams to drive mid- to upper-single-digit loan growth, but also acknowledged temporary margin headwinds and ongoing branch rationalization efforts.

Key Insights from Management’s Remarks

Management attributed quarterly performance to the Premier Financial acquisition, organic growth in key markets, and operational efficiencies, while also addressing temporary margin and expense dynamics.

• Premier integration completed: The successful systems conversion of Premier Financial was central, with 400,000 consumer and 50,000 business relationships transitioned smoothly. Management credited this seamless migration with driving higher fee income and operational scale.
• Organic growth momentum: Commercial loan and deposit growth outpaced industry averages, underpinned by robust pipelines and expansion into new markets like Knoxville and Northern Virginia. CEO Jackson noted, “Our larger organization delivered solid sequential quarter loan growth, while driving positive operating leverage.”
• Fee income expansion: Fee revenue increased 40% year-over-year, driven by new treasury management offerings and the expanded customer base from Premier. The trust and securities brokerage business reached $10 billion in assets under management, aided by cross-selling and customer retention.
• Expense and efficiency improvements: The efficiency ratio improved by 10 percentage points year-over-year due to cost synergies from Premier and targeted branch rationalization. However, management cautioned that most cost savings are now realized, and future reductions will depend on additional branch reviews and back-office integration.
• Credit quality and risk management: Credit metrics remained stable, with allowance for credit losses at 1.19% of loans. The company exited higher-risk Premier commercial loans and saw increased CRE loan payoffs, while emphasizing consistent underwriting standards in expanding loan production offices.

Drivers of Future Performance

WesBanco’s outlook is shaped by continued loan and deposit growth, the full impact of Premier integration, and margin pressures from funding costs and market dynamics.

• Loan growth amid CRE payoffs: Management is targeting mid- to upper-single-digit loan growth, but commercial real estate (CRE) loan payoffs may temper results. Jackson explained that “CRE payoffs could keep us from the high single digits,” though new markets and teams are expected to bolster the pipeline, especially in health care and commercial lending.
• Margin and funding cost dynamics: CFO Weiss flagged temporary headwinds for net interest margin as CD repricing and reduced Premier purchase accounting accretion take effect in Q3. He projected a 5-7 basis point margin decline before a rebound in Q4, with ongoing tailwinds from repricing fixed-rate loans and securities at higher yields.
• Expense discipline and branch rationalization: Management expects the expense run rate to stabilize in the low to mid-$140 million range, with further efficiencies tied to ongoing branch reviews and back-office integration. Additional branch closures and consolidation could drive future cost savings, but much of the planned Premier-related savings have already materialized.

Catalysts in Upcoming Quarters

Looking forward, our analyst team will be watching (1) the pace of organic loan and deposit growth relative to management’s mid- to upper-single-digit targets, (2) execution of further cost savings through branch rationalization and back-office integration, and (3) stabilization of net interest margin amid CD repricing and lower purchase accounting accretion. The performance of new markets and the health care lending team will also serve as important indicators of WesBanco’s ability to sustain profitable growth.

WesBanco currently trades at $30.67, down from $31.86 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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