Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 15. INCOME TAXES

Reconciliation from the federal statutory income tax rate to the effective tax rate is as follows:

	For the Years Ended December 31,
	2023			2022			2021
Federal statutory tax rate		21.0	%		21.0	%		21.0	%
Net tax-exempt interest income on securities and loans of state and    political subdivisions		(3.1	)		(2.6	)		(1.8	)
State income taxes, net of federal tax effect		3.0			3.1			2.3
Bank-owned life insurance		(1.2	)		(1.0	)		(0.6	)
General business credits		(3.9	)		(3.0	)		(1.9	)
All other—net		2.3			1.2			0.7
Effective tax rate		18.1	%		18.7	%		19.7	%

The provision for income taxes applicable to income before taxes consists of the following:

	For the Years Ended December 31,
(in thousands)	2023			2022		2021
Current:
Federal	$	31,935		$	31,560	$	33,042
State		6,763			8,239		7,655
Deferred:
Federal		(4,328	)		3,560		17,679
State		647			929		1,213
Total	$	35,017		$	44,288	$	59,589

The following income tax amounts were recorded in shareholders’ equity as elements of other comprehensive income:

(in thousands)	2023		2022			2021
Securities and defined benefit pension plan unrecognized items	$	12,369	$	(82,295	)	$	(11,322	)

Deferred tax assets and liabilities consist of the following:

	December 31,
(in thousands)	2023			2022			2021
Deferred tax assets:
Allowance for credit losses	$	31,571		$	28,535		$	29,208
Compensation and benefits		—			—			1,154
Security gains		1,320			1,472			1,565
Non-accrual interest income		833			848			766
Partnership adjustments		553			338			—
Net operating loss carryforwards		4,709			5,685			6,480
Fair value adjustments on securities available-for-sale		72,932			83,734			1,484
Lease accrual		11,178			10,410			11,399
Other		3,963			3,732			4,617
Gross deferred tax assets		127,059			134,754			56,673
Deferred tax liabilities:
Depreciation and amortization		(5,366	)		(4,786	)		(3,748	)
Accretion on securities		(577	)		(383	)		(251	)
Deferred fees and costs		(4,107	)		(3,289	)		(2,368	)
Purchase accounting adjustments		(8,398	)		(9,594	)		(9,996	)
Compensation and benefits		—			(47	)		—
Partnership adjustments		(1,818	)		—			(127	)
Lease - right of use assets		(10,173	)		(9,391	)		(10,342	)
Other		(197	)		(763	)		(1,144	)
Gross deferred tax liabilities		(30,636	)		(28,253	)		(27,976	)
Net deferred tax assets	$	96,423		$	106,501		$	28,697

No valuation allowance was established for any deferred tax assets, since management believes that deferred tax assets are likely to be realized through future reversals of existing taxable temporary differences and future taxable income.

As a result of the acquisition of Your Community Bankshares ("YCB") in 2016 and OLBK in 2019, Wesbanco has federal net operating loss (“NOL”) carryforwards of $19.6 million, which expire beginning in 2034 and 2037; respectively. Wesbanco has Maryland NOL carryforwards of $4.0 million, which begin expiring in 2030. Wesbanco has Kentucky NOL carryforwards of $13.6 million, which begin expiring in 2032. The use of the federal NOL and other carryforwards are limited by Internal Revenue Code Section 382, but they are currently expected to be utilized before their respective expiration dates.

As a result of the previous acquisitions of YCB, ESB Financial Corporation, Fidelity Bancorp, Inc., Western Ohio Financial Corporation, Winton Financial Corporation and Oak Hill Financial, Inc., retained earnings at both December 31, 2023 and 2022 included $45.9 million of qualifying and non-qualifying tax bad debt reserves existing as of December 31, 1987, upon which no provision for income taxes has been recorded. The related amount of unrecognized deferred tax liability is $10.5 million for both 2023 and 2022. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, it would be added to future taxable income.

Federal and state income taxes applicable to securities transactions totaled $0.2 million, ($0.4) million and $0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Wesbanco had $0.1 million and $0.2 million of unrecognized tax benefits and interest as of December 31, 2023 and 2022, respectively. As of December 31, 2023, none of these tax benefits would affect the effective tax rate if recognized. At December 31, 2023 and December 31, 2022, accrued interest related to uncertain tax positions was immaterial. Wesbanco provides for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.

Wesbanco is subject to U.S. federal income tax as well as to tax in various state income tax jurisdictions. Wesbanco and its prior acquired companies are no longer subject to any income tax examinations for years prior to 2020.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and the federal income tax benefit of unrecognized state tax benefits) is as follows:

	For the Years Ended December 31,
(in thousands)	2023			2022			2021
Balance at beginning of year	$	158		$	226		$	324
Additions based on tax positions related to the current year		20			—			3
Reductions due to the statute of limitations		(120	)		(68	)		(101	)
Balance at end of year	$	58		$	158		$	226