UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 000-08467

WESBANCO, INC.

(Exact name of Registrant as specified in its charter)

WEST VIRGINIA	55-0571723
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1 Bank Plaza, Wheeling, WV	26003
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 304-234-9000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each Exchange on which registered
Common Stock $2.0833 Par Value	WSBC	NASDAQ Global Select Market
Depositary Shares (each representing 1/40th interest in a share of 6.75% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A)	WSBCP	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☑    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act.    Yes  ☐    No  ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☑    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)    Yes  ☐    No  ☑

The aggregate market value of the registrant’s outstanding voting and non-voting common stock held by non-affiliates on June 30, 2020, determined using a per share closing price on that date of $20.31, was $1,299,795,869.

As of February 17, 2021, there were 67,258,727 shares of Wesbanco, Inc. common stock $2.0833 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain specifically designated portions of Wesbanco, Inc.’s definitive proxy statement which will be filed by April 30, 2021 for its Annual Meeting of Shareholders (the “Proxy Statement”) to be held in 2021 are incorporated by reference into Part III of this Form 10-K.

WESBANCO, INC.

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS 

ITEM #	ITEM	Page No.
	Part I
1	Business	3-12
1A	Risk Factors	13-22
1B	Unresolved Staff Comments	23
2	Properties	23
3	Legal Proceedings	23
4	Mine Safety Disclosures	23
	Part II
5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24-25
6	Selected Financial Data	26-30
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31-67
7A	Quantitative and Qualitative Disclosures about Market Risk	68-72
8	Financial Statements and Supplementary Data	73-139
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	140
9A	Controls and Procedures	140
9B	Other Information	140
	Part III
10	Directors, Executive Officers and Corporate Governance	141
11	Executive Compensation	141
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	141
13	Certain Relationships and Related Transactions, and Director Independence	141
14	Principal Accounting Fees and Services	141
	Part IV
15	Exhibits and Financial Statement Schedules	142
16	Form 10-K Summary	142-146
	Signatures	147

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PART I

ITEM 1. BUSINESS

GENERAL

Wesbanco, Inc. (“Wesbanco” or the “Company”), a bank holding company incorporated in 1968 and headquartered in Wheeling, West Virginia, offers a full range of financial services including retail banking, corporate banking, personal and corporate trust services, brokerage services, mortgage banking and insurance. Wesbanco offers these services through two reportable segments, community banking and trust and investment services. For additional information regarding Wesbanco’s business segments, please refer to Note 24, “Business Segments” in the Consolidated Financial Statements.

As of December 31, 2020, Wesbanco operated one commercial bank: Wesbanco Bank, Inc. (“Wesbanco Bank” or the “Bank”). The Bank has 233 branches and 226 ATM machines located in West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana and Maryland. Total assets of Wesbanco as of December 31, 2020 approximated $16.4 billion. Wesbanco Bank also offers trust and investment services and various alternative investment products including mutual funds and annuities. The market value of assets under management of the trust and investment services segment is approximately $5.0 billion as of December 31, 2020. These assets are held by Wesbanco Bank in fiduciary or agency capacities for its customers and therefore are not included as assets on Wesbanco’s Consolidated Balance Sheets.

On November 22, 2019, Wesbanco completed the acquisition of Old Line Bancshares, Inc. (“OLBK”), a bank holding company headquartered in Bowie, Maryland, with approximately $3.0 billion in assets excluding goodwill, $2.4 billion in total deposits, and $2.5 billion in total loans, and 37 branches in Maryland. The transaction expanded Wesbanco’s franchise into Maryland by adding four new Metropolitan Statistical Areas in the Washington D.C. area, Baltimore, Maryland area, Lexington Park, Maryland area and Frederick – Gaithersburg – Rockville, Maryland area.

Wesbanco also offers additional services through its non-banking subsidiaries:

Wesbanco Insurance Services, Inc. (“Wesbanco Insurance”) is a multi-line insurance agency specializing in property, casualty, life and title insurance, with benefit plan sales and administration for personal and commercial clients.

Wesbanco Securities, Inc. (“Wesbanco Securities”) is a full service broker-dealer, which also offers discount brokerage services.

Wesbanco Asset Management, Inc., holds certain investment securities and loans in a Delaware-based subsidiary.

Wesbanco Properties, Inc. holds certain commercial real estate properties. The commercial property is leased to Wesbanco Bank and to certain non-related third parties.

Kentuckiana Real Estate Holdings, LLC, and Southern Indiana Real Estate Holdings, LLC, are Indiana and Kentucky-based limited liability corporations that hold certain real estate properties in those markets. In addition, FAH, LLC, WSB Realty, LLC and Flagship Acquisitions Trust, which were acquired from OLBK and are Maryland limited liability corporations, hold certain real estate properties located in the Maryland area. Each of these entities is a wholly owned subsidiary of Wesbanco Bank.

CBIN Insurance Inc. is a captive insurance company, which issues policies to Wesbanco’s banking subsidiaries for certain risks that are not covered by the Company’s commercial insurances policies purchased from third-party carriers.

Wesbanco has eleven capital trusts, which are all wholly-owned trust subsidiaries formed for the purpose of issuing trust preferred securities (“Trust Preferred Securities”) and lending the proceeds to Wesbanco. For more information regarding Wesbanco’s issuance of Trust Preferred Securities, please refer to Note 11, “Subordinated Debt and Junior Subordinated Debt” in the Consolidated Financial Statements.

AMSCO, Inc. (“AMSCO”) is a wholly-owned subsidiary of Wesbanco Bank, which formerly engaged in the management of certain real estate development and construction of 1-4 family residential units. It is in the process of winding up its business activities and will be dissolved.    

Wesbanco Bank’s Investment Department also serves as investment adviser to a family of mutual funds, namely the “WesMark Funds.” The fund family is comprised of the WesMark Growth Fund, the WesMark Balanced Fund, the WesMark Small Company Growth Fund, the WesMark Government Bond Fund, the WesMark West Virginia Municipal Bond Fund, and the WesMark Tactical Opportunity Fund.

As of December 31, 2020, none of Wesbanco’s subsidiaries were engaged in any operations in foreign countries, and only one had any transactions with customers in foreign countries. The Bank also provides letters of credit internationally for certain domestic customers and provides international wire services through a third-party correspondent bank.

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WEBSITE ACCESS TO WESBANCO’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION

All of Wesbanco’s electronic filings for 2020 filed with the Securities and Exchange Commission (the “SEC”), including this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are made available at no cost on Wesbanco’s website, www.wesbanco.com, through the “Investors” link as soon as reasonably practicable after Wesbanco files such material with, or furnishes it to, the SEC. Wesbanco’s SEC filings are also available through the SEC’s website at www.sec.gov.

Upon written request of any shareholder of record on December 31, 2020, Wesbanco will provide, without charge, a printed copy of this 2020 Annual Report on Form 10-K, including financial statements and schedules, as required to be filed with the SEC. To obtain a copy of this report, contact: John Iannone, Wesbanco, Inc., 1 Bank Plaza, Wheeling, West Virginia 26003 (304) 905-7021.

HUMAN CAPITAL RESOURCES

At December 31, 2020, we employed 2,612 full-time equivalent employees. At that date, the average tenure of all of our full-time employees was over 10 years while the average tenure of our executive officers was over 19 years. None of our employees are represented by collective bargaining agreements. We believe our relations with our employees is very good.  The safety and care of our employees and their families as well as their communities is paramount for us.

Of our total employees, 9% or 235 were minorities with 88 of those officers or 8.1%.  Of our total officers of 1,087, 590 or 54.3% were women.  Our turnover rate for 2020 was 18.54%, notwithstanding the completion of a data conversion of a recently acquired bank.  Our turnover rate for officers was just 3.52% for 2020.

Our corporate culture has been established by senior management and overseen by our board of directors.  Built upon our ‘Better Banking Pledge’ and our ‘Service & Support Pledge’, our culture, which is both customer and employee-centric, is focused on growing long-term relationships by pledging to serve all personal and business customer needs efficiently and effectively while treating our employees with dignity and respect.

Wesbanco has been a leader in its communities for over 150 years, and we want to continue to take a leadership role by noting our stance for equality.  We are a group of diverse backgrounds and ethnicities, and share the same values of dignity and respect for our co-workers, customers, and fellow community members.  We have been able to enhance our diversification through the retention of many of the employees we have acquired through our acquisition strategy who bring a strong skill set and a diverse background.

Wesbanco believes in open, honest discussion. In addition to our Women’s Symposium, which has been held for over 4 years, we have added a Diversity and Inclusion Forum as an added resource and a positive catalyst for how we conduct business. These inclusive programs focus on facilitating educational opportunities, sharing experiences, networking with management, and partnering with mentors. The goal is to ignite and support a passion for our employees to find both personal and professional success.  Both initiatives include board, management and staff participants.

In addition we have engaged in leadership training through senior and middle management supervisors.  We annually assess talent through a specific Talent Development Program to identify, promote and build development plans among multiple levels of management.  These efforts have resulted in Wesbanco being designated as one of the best workplaces in several markets, including Columbus and Western Pennsylvania.

Our hope is that this not only helps us evolve and grow as a company but that it also spreads to all of our other community efforts.  In fact, during the past year alone, Wesbanco has made approximately $1 million of philanthropic donations in support of our communities; in addition to the $0.5 million of pandemic-related grants we distributed to non-profit organizations across our footprint. Further, our employees are equally generous, as they have volunteered more than 11,000 hours of personal time across a number of community development services.

COMPETITION

Competition in the form of price and service from other banks, including local, regional and national banks and financial companies such as savings and loan companies, internet banks, payday lenders, money services businesses, credit unions, finance companies, brokerage firms and other non-banking companies providing various regulated and non-regulated financial services and products, is intense in most of the markets served by Wesbanco and its subsidiaries. Wesbanco’s trust and investment services segment receives competition from commercial banks, trust companies, mutual fund companies, investment advisory firms, law firms, brokerage firms, and other financial services companies. As a result of consolidation within the financial services industry, mergers between, and the expansion of, financial institutions both within and outside of Wesbanco’s major markets have provided significant competitive pressure in those markets. Many of Wesbanco’s competitors have greater resources and, as such, may have higher lending limits and may offer other products and services that are not provided by Wesbanco. Wesbanco generally competes on the basis of superior customer service and responsiveness to customer needs, available loan and deposit products, rates of interest charged on loans, rates of interest paid for deposits, and the availability and pricing of trust, brokerage and insurance services. As a result of Wesbanco’s expansion into certain larger metropolitan markets, it has faced entrenched larger bank competitors with an already existing customer base that may far exceed Wesbanco’s initial entry position into those markets. As a result, Wesbanco may be forced to compete more aggressively for loans, deposits, trust and insurance products to grow its market share, potentially reducing its current and future profit potential from such markets.

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SUPERVISION AND REGULATION

As a bank holding company and a financial holding company under federal law, Wesbanco is subject to supervision and examination by the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and is required to file with the Federal Reserve Board reports and other information regarding its business operations and the business operations of its subsidiaries.  Since Wesbanco is both a bank holding company and a financial holding company, Wesbanco can offer customers virtually any type of service that is financial in nature or incidental thereto, including banking and activities closely related to banking, securities underwriting, insurance (both underwriting and agency) and merchant banking. Wesbanco is now subject to additional supervision from the Federal Reserve Board and its primary banking regulators due to its exceeding the $10 billion asset threshold and seeks to ensure that sufficient resources are allocated to safety and soundness compliance with applicable laws, such as the Bank Secrecy Act (“BSA”), anti-money laundering (“AML”) regulations, and the Community Reinvestment Act (“CRA”), among others, and risk management and internal audit, among other functions, so that the enhanced requirements of the Federal Reserve Board and its primary banking regulators are met.

As indicated above, Wesbanco presently operates one bank subsidiary, Wesbanco Bank, which is a West Virginia-chartered banking corporation which is not a member bank of the Federal Reserve System. It is subject to examination and supervision by the Federal Deposit Insurance Corporation (the “FDIC”), the West Virginia Division of Financial Institutions (“WVDIF”), and the Consumer Financial Protection Bureau (“CFPB”) because its assets exceed $10 billion. The deposits of Wesbanco Bank are insured by the Deposit Insurance Fund (“DIF”) of the FDIC. Wesbanco’s non-bank subsidiaries are subject to examination and supervision by the Federal Reserve Board and specifically, the Federal Reserve Bank of Cleveland, Ohio (“Federal Reserve”) and examination by other federal and state agencies, including, in the case of certain securities activities, regulation by the SEC, the Financial Institution Regulatory Authority, Inc. (“FINRA”), the Municipal Securities Rulemaking Board and the Securities Investors Protection Corporation (“SIPC”). Wesbanco Bank maintains one designated financial subsidiary, Wesbanco Insurance, which, as indicated above, is a multi-line insurance agency specializing in property, casualty, life and title insurance, with benefit plan sales and administration for personal and commercial clients. As a result of exceeding the $10 billion asset threshold, Wesbanco Bank is now subject to enhanced prudential supervision from both the FDIC and WVDIF as part of their large bank supervision program.

Wesbanco is also under the jurisdiction of the SEC and certain state securities commissions for matters relating to the offering and sale of its securities. Wesbanco is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, as administered by the SEC. Wesbanco is listed on the NASDAQ Global Select Market (the “NASDAQ”) under the trading symbol “WSBC” and is subject to the rules of the NASDAQ for listed companies.

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as amended (the “Riegle-Neal Act”), a bank holding company may acquire banks in states other than its home state, subject to certain limitations. The Riegle-Neal Act also authorizes banks to merge across state lines, thereby creating interstate banking. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), banks are also permitted to establish de novo branches across state lines to the same extent that a state-chartered bank in each host state would be permitted to open branches.

Under the BHCA, prior Federal Reserve Board approval is required for Wesbanco to acquire more than 5% of the voting stock of any bank. In determining whether to approve a proposed bank acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low- and moderate-income neighborhoods, consistent with safe and sound operation of the bank under the Community Reinvestment Act, as amended (the “CRA”).

HOLDING COMPANY REGULATIONS

As indicated in “Item 1. Business-General”, Wesbanco has one state-chartered bank subsidiary, Wesbanco Bank, as well as non-bank subsidiaries. The subsidiary bank is subject to affiliate transaction restrictions under federal law, which limit “covered transactions” by the subsidiary bank with the parent and any non-bank subsidiaries of the parent, which are referred to in the aggregate in this paragraph as “affiliates” of the subsidiary bank. “Covered transactions” include loans or extensions of credit to an affiliate (including repurchase agreements), purchases of or investments in securities issued by an affiliate, purchases of assets from an affiliate, the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit, the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate, certain transactions that involve borrowing or lending securities, and certain derivative transactions with an affiliate. Such covered transactions between the subsidiary bank and any single affiliate are limited in amount to 10% of the subsidiary bank’s capital and surplus, and, with respect to covered transactions with all affiliates in the aggregate, are limited in amount to 20% of the subsidiary bank’s capital and surplus. Furthermore, such loans or extensions of credit, guarantees, acceptances and letters of credit, and any credit exposure resulting from securities borrowing or lending transactions or derivatives transactions, are required to be secured by collateral at all times in amounts specified by law. In addition, all covered transactions must be conducted on terms and conditions that are consistent with safe and sound banking practices.

The Dodd-Frank Act requires a bank holding company to act as a source of financial strength to its subsidiary bank. Under this source of strength requirement, the Federal Reserve Board may require a bank holding company to make capital infusions into a troubled subsidiary bank, and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. A capital infusion conceivably could be required at a time when Wesbanco may not have the resources to provide it.

5

PAYMENT OF DIVIDENDS

Dividends from the subsidiary bank are a significant source of funds for payment of dividends to Wesbanco’s shareholders. For the year ended December 31, 2020, Wesbanco declared cash dividends to its preferred and common shareholders of approximately $88.5 million.

As of December 31, 2020, Wesbanco Bank was “well capitalized” under the definition in Section 324.403 of the FDIC Regulations. Therefore, as long as the Bank remains “well capitalized” or even becomes “adequately capitalized,” there would be no basis under Section 324.403 to limit the ability of the Bank to pay dividends because it had not become undercapitalized, significantly undercapitalized or critically undercapitalized. Effective January 1, 2016, Wesbanco Bank and Wesbanco became subject to “capital conservation buffer” rules, phased in over a four year period which ended in 2019, which requires Wesbanco and Wesbanco Bank to have capital levels above the regulatory minimums to pay dividends (discussed below in connection with the Basel III initiative under “Item 1. Business—Capital Requirements”).

All financial institutions are subject to the prompt corrective action provisions set forth in Section 38 of the Federal Deposit Insurance Act (the “FDI Act”) and the provisions set forth in Section 308.201 of the FDIC Regulations. Immediately upon a state non-member bank receiving notice, or being deemed to have notice, that the bank is undercapitalized, significantly undercapitalized, or critically undercapitalized, as defined in Section 324.403 of the FDIC Regulations, the bank is precluded from being able to pay dividends to its shareholders based upon the requirements in Section 38(d) of the FDI Act, 12 U.S.C. § 1831o(d).

In addition, with respect to possible dividends by the Bank, under Section 31A-4-25 of the West Virginia Code, the prior approval of the West Virginia Commissioner of Financial Institutions would be required if the total of all dividends declared by the Bank in any calendar year would exceed the total of the Bank’s net profits for that year combined with its retained net profits of the preceding two years. Further, Section 31A-4-25 limits the ability of a West Virginia banking institution to pay dividends until the surplus fund of the banking institution equals the common stock of the banking institution and if certain specified amounts of recent profits of the banking institution have not been carried to the surplus fund.

If, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice which, depending on the financial condition of the bank, could include the payment of dividends, such authority may require, after notice and hearing, that such bank cease and desist from such practice. The Federal Reserve Board has issued policy statements, which provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings. Under applicable law, bank regulatory agency approval is required if the total of all dividends declared by a bank in any calendar year exceeds the available retained earnings or exceeds the aggregate of the bank’s net profits (as defined by regulatory agencies) for that year and its retained net profits for the preceding two years. As of December 31, 2020, under FDIC regulations, Wesbanco could receive, without prior regulatory approval, a dividend of up to $306.3 million from Wesbanco Bank. Additional information regarding dividend restrictions is set forth in Note 22, “Regulatory Matters,” in the Consolidated Financial Statements.

On February 24, 2009, the Federal Reserve Division of Banking Supervision and Regulation issued Supervisory Letter SR 09-4, “Applying Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies,” providing direction to bank holding companies on the payment of dividends, capital repurchases and capital redemptions. Although the letter largely reiterates longstanding Federal Reserve supervisory policies, it emphasizes the need for a bank holding company to review various factors when considering the declaration of a dividend or taking action that would reduce regulatory capital provided by outstanding financial instruments. These factors include the potential need to increase loan loss reserves, write down assets and reflect declines in asset values in equity. In addition, the bank holding company should consider its past and anticipated future earnings, the dividend payout ratio in relation to earnings, and adequacy of regulatory capital before any action is taken. The consideration of capital adequacy should include a review of all known factors that may affect capital in the future. On July 24, 2020, Attachment C was added to SR 09-4 to provide greater clarity regarding the situations in which holding companies may expect an expedited consultation under the process described in SR 09-4. A holding company must (1) have net income available over the past year sufficient to fully fund dividends, (2) is not considering stock repurchases or redemptions in the current quarter, (3) does not have any concentrations in commercial real estate lending that exceed supervisory thresholds, and (4) is in good supervisory condition, to receive this expedited consultation.

In certain circumstances, defined by regulation relating to levels of earnings and capital, advance notification to, and in some circumstances, approval by the regulator could be required to declare a dividend or repurchase or redeem capital instruments.

FDIC INSURANCE

FDIC insurance premiums are assessed by the FDIC using a risk-based approach that places insured institutions into categories based on capital and risk profiles. In 2020, Wesbanco Bank paid or accrued deposit insurance premiums of $6.7 million, compared to $2.1 million and $3.0 million in 2019 and 2018, respectively. The decrease in 2019’s premiums was due to the recognition of Wesbanco Bank’s small bank assessment credit of $3.4 million, of which a small portion of the credit was acquired in the OLBK acquisition.  This credit was applied to the second and third quarter 2019 FDIC insurance invoices, offsetting them in full, as well as a portion of the fourth quarter 2019 invoice that was paid in 2020. Beginning in 2019, Wesbanco Bank is considered to be a large bank for the purposes of the premium calculation because its total assets exceed $10 billion, and it is therefore subject to more continuous oversight by the FDIC.  Large banks are subject to a more complex insurance premium calculation with additional loan-related and other risk factors involved which leads to an overall higher rate as compared to that of smaller banks.

6

CAPITAL REQUIREMENTS

The Federal Reserve Board had historically issued risk-based capital ratio and leverage ratio guidelines for bank holding companies. The risk-based capital ratio guidelines establish a systematic analytical framework that makes regulatory capital requirements more sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures into explicit account in assessing capital adequacy, and minimizes disincentives to holding liquid, low-risk assets. Under the guidelines and related policies, bank holding companies must maintain capital sufficient to meet both a risk-based asset ratio test and a leverage ratio test on a consolidated basis. The risk-based ratio is determined by allocating assets and specified off-balance sheet commitments into several weighted categories, with higher weightings being assigned to categories perceived as representing greater risk. A bank holding company’s capital is then divided by total risk-weighted assets to yield the risk-based ratio. The leverage ratio is determined by relating core capital to total assets adjusted as specified in the guidelines. The Bank is subject to substantially similar capital requirements.

The federal regulatory authorities’ risk-based capital guidelines are currently based upon agreements reached by the Basel Committee on Banking Supervision (the “Basel Committee”). The Basel Committee is a committee of central banks and bank supervisors and regulators from the major industrialized countries that develops broad policy guidelines for use by each country’s supervisors in determining the supervisory policies they apply. In December 2010, the Basel Committee issued a strengthened set of international capital and liquidity standards for banks and bank holding companies, known as “Basel III.” In July 2013, the U.S. federal banking agencies issued a joint final rule that implements the Basel III capital standards and establishes the minimum capital levels required under the Dodd-Frank Act. The rule was effective January 1, 2015, subject to a transition period providing for full implementation on January 1, 2019. The Economic Growth, Regulatory Relief, and Consumer Protection (“EGRRCPA”) Act, enacted into law in May 2018, exempts banks with total consolidated assets of less than $10 billion that exceed the community bank leverage ratio from the capital requirements under Basel III. Wesbanco Bank’s assets are in excess of $10 billion, however, so the exemption is not applicable.

Generally, under the applicable guidelines, a financial institution’s capital is divided into common equity Tier 1 (“CET1”), total Tier 1 and Tier 2. CET1 includes common shares and retained earnings less goodwill, intangible assets subject to limitation and certain deferred tax assets subject to limitation. In addition, under the final capital rule, an institution may make a one-time, permanent election to continue to exclude accumulated other comprehensive income from capital. If an institution does not make this election, unrealized gains and losses will be included in the calculation of its CET1. Total Tier 1 is comprised of CET1 and certain restricted capital instruments, including qualifying cumulative perpetual preferred stock and qualifying trust preferred securities, in their Tier 1 capital, up to a limit of 25% of Tier 1 capital. (See below within this section for more information regarding the capital treatment of trust preferred securities.)

Tier 2, or supplementary capital, includes, among other things, portions of trust preferred securities and cumulative perpetual preferred stock not otherwise counted in Tier 1 capital, as well as perpetual preferred stock, intermediate-term preferred stock, hybrid capital instruments, perpetual debt, mandatory convertible debt securities, term subordinated debt, unrealized holding gains on equity securities, and the allowance for loan and lease losses, all subject to certain limitations. “Total capital” is the sum of Tier 1 and Tier 2 capital.

The Federal Reserve Board has established the following minimum capital levels banks and bank holding companies are required to maintain as a percentage of risk-weighted assets (including various off-balance sheet items): (i) CET1 of at least 4.5%, (ii) Tier 1 capital ratio of at least 6%, (iii) total capital ratio (Tier 1 and Tier 2 capital) of at least 8%; and (iv) a non-risk-based leverage ratio (Tier 1 capital to average consolidated assets) of 4%. The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in credit and market risk profiles among banks and financial holding companies, to account for off-balance sheet exposure, and to minimize disincentives for holding liquid assets. Balance sheet and off-balance sheet exposures are assigned to one of several risk-weights primarily based on relative credit risk. The capital amounts and classifications are also subject to qualitative judgements by the regulators about components, risk-weightings, and other factors. Additionally, with the final capital rule fully implemented as of January 1, 2019, an institution is required to maintain a 2.5% common equity Tier 1 capital conservation buffer over the minimum risk-based capital requirements to avoid restrictions on the ability to pay dividends, discretionary bonuses to executive officers, and engage in share repurchases.

Failure to meet applicable capital guidelines could subject a financial institution to a variety of enforcement remedies available to the federal regulatory authorities, including limitations on the ability to pay dividends, the issuance by the regulatory authority of a capital directive to increase capital, and the termination of deposit insurance by the FDIC, as well as to the measures described below under “Prompt Corrective Action” as applicable to undercapitalized institutions.

As of December 31, 2020, Wesbanco’s CET1, Tier 1 and total capital to risk-adjusted assets ratios were 13.40%, 14.72%, and 17.58%, respectively. Wesbanco made a timely permanent election to exclude accumulated other comprehensive income from regulatory capital. As of December 31, 2020, Wesbanco Bank’s CET1, Tier 1 and total capital to risk-adjusted assets ratios were 14.04%, 14.04% and 15.40%, all in excess of the minimum requirements. Neither Wesbanco nor the Bank had been advised by the appropriate federal banking regulator of any specific leverage ratio applicable to it. As of December 31, 2020, Wesbanco’s leverage ratio was 10.51% and the Bank’s leverage ratio was 10.00%.

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As of December 31, 2020, Wesbanco had $192.3 million in subordinated and junior subordinated debt on its Consolidated Balance Sheets, which includes $132.2 million of junior subordinated debt. For regulatory purposes, Trust Preferred Securities totaling $130.0 million underlying such junior subordinated debt were included in Tier 2 capital as of December 31, 2020, in accordance with regulatory reporting requirements. In 2013, the federal banking agencies amended capital requirements to generally exclude trust preferred securities from Tier 1 capital. A grandfather provision, however, permits bank holding companies with consolidated assets of less than $15 billion, which Wesbanco was through September 30, 2019, to continue counting existing trust preferred securities as Tier 1 capital until they mature. The final Basel III capital rule permanently grandfathers trust preferred securities issued before May 19, 2010 for institutions of less than $15 billion in size, subject to a 25% limit of Tier 1 capital. The amount of trust preferred securities and certain other elements in excess of the 25% limit may be included in Tier 2 capital, subject to restrictions. As of December 31, 2020, Wesbanco’s total assets had increased beyond $15 billion due to its merger with OLBK; therefore, all such securities are no longer counted as Tier 1 capital but instead are counted as Tier 2 capital subject to limits. For more information regarding trust preferred securities, please refer to Note 11, “Subordinated and Junior Subordinated Debt” in the Consolidated Financial Statements.

The risk-based capital standards of the Federal Reserve and the FDIC specify that evaluations by the banking agencies of a bank’s capital adequacy will include an assessment of the exposure to declines in the economic value of the bank’s capital due to changes in interest rates. These banking agencies have issued a joint policy statement on interest rate risk describing prudent methods for monitoring such risk that rely principally on internal measures of exposure and active oversight of risk management activities by senior management.

PROMPT CORRECTIVE ACTION

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires federal banking regulatory authorities to take “prompt corrective action” with respect to depository institutions that do not meet minimum capital requirements. For these purposes, FDICIA establishes five capital tiers: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

An institution is deemed to be “well-capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8% or greater, a Tier 1 leverage ratio of 5% or greater, and a common equity Tier 1 ratio of 6.5% or greater, and is not subject to a regulatory order, agreement, or directive to meet and maintain a specific capital level for any capital measure. An institution is deemed to be “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 6% or greater, generally a Tier 1 leverage ratio of 4% or greater, and a common equity Tier 1 ratio of 4.5% or greater, and the institution does not meet the definition of a “well-capitalized” institution. An institution that does not meet one or more of the “adequately capitalized” tests is deemed to be “undercapitalized.” If the institution has a total risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital ratio that is less than 4%, or a Tier 1 leverage ratio or common equity Tier 1 ratio that is less than 3%, it is deemed to be “significantly undercapitalized.” Finally, an institution is deemed to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%. As of December 31, 2020, as noted above in “Capital Requirements,” Wesbanco Bank had capital levels that met the “well-capitalized” standards under FDICIA and its implementing regulations.

FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a cash dividend, or paying any management fee to its holding company, if the depository institution would thereafter be undercapitalized. Undercapitalized institutions are subject to growth limitations and are required to submit a capital restoration plan. If any depository institution subsidiary of a holding company is required to submit a capital restoration plan, the holding company would be required to provide a limited guarantee regarding compliance with the plan as a condition of approval of such plan by the appropriate federal banking agency. If an undercapitalized institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. Significantly undercapitalized institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. Critically undercapitalized institutions may not, beginning 60 days after becoming critically undercapitalized, make any payment of principal or interest on their subordinated debt and/or trust preferred securities. In addition, critically undercapitalized institutions are subject to appointment of a receiver or conservator within 90 days of becoming critically undercapitalized.

GRAMM-LEACH-BLILEY ACT

Under the Gramm-Leach-Bliley Act (the “GLB Act”), banks are no longer prohibited from associating with, or having management interlocks with, a business organization engaged principally in securities activities. By qualifying as a “financial holding company,” as authorized under the GLB Act, a bank holding company acquires new powers not otherwise available to it. Wesbanco has elected to become a financial holding company under the GLB Act. It also has qualified a subsidiary of the Bank as a financial subsidiary under the GLB Act.

Financial holding company powers relate to “financial activities” that are determined by the Federal Reserve Board, in coordination with the Secretary of the Treasury, to be financial in nature, incidental to an activity that is financial in nature, or complementary to a financial activity, provided that the complementary activity does not pose a safety and soundness risk. The GLB Act itself defines certain activities as financial in nature, including but not limited to: underwriting insurance or annuities; providing financial or investment advice; underwriting, dealing in, or making markets in securities; merchant banking, subject to significant limitations; insurance company portfolio investing, subject to significant limitations; and any activities previously found by the Federal Reserve Board to be closely related to banking.

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National and state banks are permitted under the GLB Act, subject to capital, management, size, debt rating, and CRA qualification factors, to have “financial subsidiaries” that are permitted to engage in financial activities not otherwise permissible. However, unlike financial holding companies, financial subsidiaries may not engage in insurance or annuity underwriting; developing or investing in real estate; merchant banking (for at least five years); or insurance company portfolio investing.

DODD-FRANK ACT

The Dodd-Frank Act, enacted on July 21, 2010, and the rules implementing its provisions have resulted in numerous and wide-ranging reforms to the structure of the U.S. financial system. This includes, among other things, rules to promote financial stability and prevent or mitigate the risks that may arise from the material distress or failure of a large bank holding company; enhance consumer protections; prohibit proprietary trading; and implement enhanced prudential requirements for large bank holding companies regarding risk-based capital and leverage, risk and liquidity management, stress testing, and recovery and resolution planning. The Dodd-Frank Act, including current and future rules implementing its provisions and the interpretation of those rules, have affected, and management expects will continue to affect, most of Wesbanco’s businesses in some way, either directly through regulation of specific activities or indirectly through regulation of concentration risks, capital or liquidity.

Certain bank holding companies are subjected to increased capital requirements (discussed above under “Item 1. Business—Capital Requirements”).

The Volcker Rule and the final rules jointly issued by federal banking agencies implementing the rule’s provisions limit Wesbanco’s ability to engage in proprietary trading, as well as its ability to sponsor or invest in hedge funds or private equity funds. The Volcker Rule also includes certain compliance program requirements that apply to banking entities that engage in permissible proprietary trading or permitted covered fund activities. The federal banking agencies recently revised the Volcker Rule compliance requirements, effective January 1, 2020.  Under the new rule, banking entities that, together with their affiliates and subsidiaries, have an average gross sum of trading assets and liabilities (excluding obligations of or guaranteed by the United States or an agency of the United States) of less than $1 billion for four (4) consecutive quarters are presumed to be in compliance with the Volcker Rule’s restrictions on proprietary trading and acquisition or retention of ownership interests in covered funds.  Consequently such banking entities do not have an affirmative obligation to demonstrate compliance with such restrictions (“limited trading compliance presumption”). Wesbanco meets the limited trading compliance presumption because its gross consolidated trading assets and liabilities have been below $1 billion for four consecutive quarters.

An interim final rule was issued in January 2014 that exempts investments in certain collateralized debt obligations backed primarily by trust preferred securities from the provisions of the Volcker Rule. This interim final rule was effective April 1, 2014 and did not have a material impact on Wesbanco for the year ended December 31, 2020.

The Federal Reserve Board revised the Volcker Rule, issuing a final rule in November 2019. Under the new rule, banking entities with gross consolidated trading assets and liabilities between $1 billion and $20 billion will be subject to a simplified compliance program because they will be considered to have “moderate” trading assets. The new rule was effective January 1, 2020; however, Wesbanco is not subject to the moderate trading compliance program because we have gross consolidated trading assets and liabilities below $1 billion.  

Passed in 2011, the Durbin Amendment requires the Federal Reserve to limit fee charges to retailers for debit card processing. The Federal Reserve Board promulgated Regulation II (Debit Card Interchange Fees and Routing) that limits the interchange fees paid by merchants to issuers when their debit cards are used as payment. An issuer is defined as “any person that authorizes the use of the debit card to perform an electronic debit transaction.” The application of the Durbin Amendment is determined by whether the issuer, together with its affiliates, has $10 billion in assets as of the end of the calendar year preceding the date of the electronic debit transaction. An affiliate is defined as “any company that controls, or is controlled by, or is under common control with another company.” Therefore, if an insured institution issues a debit card and it, together with its affiliates, has assets exceeding $10 billion, it is subject to this rule. The rule caps debit card interchange fees (also known as swipe fees) at $0.21 plus an additional 0.05% of the value of the transaction. Previously, the average interchange fee was approximately $0.44 per transaction for an insured institution. Financial institutions with more than $10 billion in assets by the year-end assessment deadline are subject to the cap on interchange income in July of the following year. Wesbanco and the Bank were subject to the requirements imposed by the Durbin Amendment because, for purposes of determining whether an issuer has $10 billion in assets, the assets of the institution and its affiliates are combined, effective for transactions beginning in July of 2019.

Additionally, section 165(i)(2) of the Dodd-Frank Act—as amended by the Economic Growth, Regulatory Relief and Consumer Protection EGRRCPA, requires annual company-run stress tests for bank holding companies with total consolidated assets greater than $100 billion.

The Federal Reserve Board regulates bank holding companies, and therefore, if a bank holding company has total consolidated assets of $100 billion or more, it will be required to conduct the Federal Reserve Board stress-tests. Wesbanco Bank, a subsidiary state nonmember bank, is governed by the FDIC. Under the FDIC rule, a covered bank includes “any state nonmember bank . . . with average total consolidated assets . . . that are greater than $10 billion but less than $50 billion.” However, the FDIC proposed a rule in December 2018 to conform this definition to Section 165 of the Dodd-Frank Act, as amended by the EGRRCPA, to state that a “covered bank” is a nonmember bank or state savings association with average total consolidated assets that are greater than $250 billion. Wesbanco Bank has less than $100 billion in average total consolidated assets, and therefore, is not subject to the Federal Reserve Board’s or the FDIC’s stress-test rules.

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If the Dodd-Frank Act stress test rules were to apply at some point in the future, Wesbanco would have to assess the potential impact of a minimum of three macroeconomic scenarios—baseline, adverse, and severely adverse—on its consolidated losses, revenues, balance sheets (including risk-weighted assets) and capital. Each scenario includes economic variables, including macroeconomic activity, unemployment, exchange rates, prices, incomes and interest rates. The adverse and severely adverse scenarios are not forecasts, but rather hypothetical scenarios designed to assess the strength and resilience of financial institutions. Additionally, Wesbanco would have to publicly disclose these test results on an annual basis. The required summary of results could be published on Wesbanco’s web site or in any other forum that is reasonably accessible to the public.

As required by Section 165 of the Dodd-Frank Act, the Federal Reserve issued a rule that strengthens the supervision and regulation of large U.S. bank holding companies and foreign banking organizations by establishing a number of enhanced prudential standards. These standards include liquidity, risk management, and capital. Under the rule, a publicly traded bank holding company with $10 billion or more in consolidated assets is required to establish an enterprise-wide risk committee. However, the EGRRCPA raised the threshold to $50 billion. To conform the rule to the EGRRCPA, the Federal Reserve Board proposed a rule in November 2018 to increase the threshold to $50 billion. Wesbanco is therefore, currently not subject to the Federal Reserve Enhanced Prudential Standards.

The Dodd-Frank Act made several changes affecting the securitization markets, which may affect a bank’s ability or desire to use those markets to meet funding or liquidity needs. One of these changes calls for federal regulators to adopt regulations requiring the sponsor of a securitization to retain at least 5% of the credit risk, with exceptions for “qualified residential mortgages.”

Publicly traded companies are required by the Dodd-Frank Act to give shareholders an advisory vote on executive compensation, and, in some cases, golden parachute arrangements. Further, SEC and NASDAQ rulemaking under the Dodd-Frank Act requires NASDAQ-listed companies to have a compensation committee composed entirely of independent directors. Wesbanco’s Compensation Committee members currently satisfy the independence criteria. The Dodd-Frank Act also called for regulators to issue new rules relating to incentive-based compensation arrangements deemed excessive, and proxy access by shareholders. The SEC has not issued rules relating to excessive compensation arrangements.

All banks and other insured depository institutions will have increased authority to open new branches across state lines (discussed above under “Item 1. Business—Supervision and Regulation”). A provision authorizing insured depository institutions to pay interest on checking accounts will likely increase Wesbanco’s interest expenses. The Consumer Financial Protection Bureau, a federal agency created by the Dodd-Frank Act, has the authority to write rules implementing numerous consumer protection laws applicable to all banks (discussed below under “Item 1. Business—Consumer Protection Laws”).

THE CORONAVIRUS AID, RELIEF AND ECONOMIC SECURITY (“CARES”) ACT

In response to the COVID-19 pandemic, the CARES Act was signed into law on March 27, 2020 to provide national emergency economic relief measures. Many of the CARES Act’s programs are dependent upon the direct involvement of U.S. financial institutions, such as the Company and the Bank, and have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Federal Reserve and other federal banking agencies, including those with direct supervisory jurisdiction over the Company and the Bank. Furthermore, as the COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.  Building upon the provisions of the CARES Act, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (“Economic Aid Act”) was signed into law on December 27, 2020.  The Economic Aid Act was drafted in response to the continuing effects of the pandemic on the economy and provided for extensions and amendments to many features of the CARES Act. In the future, it is possible that Congress will enact additional COVID-19 response legislation, including further amendments to the CARES or the Economic Aid Act or other new bills comparable in scope to these Acts. The Company continues to assess the impact of these Acts and other statutes, regulations and supervisory guidance related to the COVID-19 pandemic.

 The CARES Act amends the SBA’s loan program, in which the Bank participates, to create a guaranteed, unsecured loan program, the Paycheck Protection Program (“PPP”), to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19. In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. Shortly thereafter, and due to the evolving impact of the COVID-19 pandemic, additional legislation was enacted authorizing the SBA to resume accepting PPP applications on July 6, 2020 and extending the PPP application deadline to August 8, 2020.  The passage of the Economic Aid Act further reauthorized lending, providing for a new pool of available funds under the PPP loan program through March 31, 2021, and among other things, modified the provisions related to making PPP loans and the forgiveness of such loans.  The Second Draw PPP loan program provides additional assistance to borrowers who previously received a SBA PPP loan under the CARES Act provisions, subject to certain conditions. As a participating lender in the PPP loan program, the Bank continues to monitor legislative, regulatory, and supervisory developments related thereto.

 The CARES Act permits banks to suspend requirements under GAAP for loan modifications to borrowers affected by COVID-19 that would otherwise be characterized as TDRs and suspend any determination related thereto if (i) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 emergency declaration and (ii) the applicable loan was not more than 30 days past due as of December 31, 2019.  The Economic Aid act further extends the relief granted by the CARES Act for TDRs by one year to December 31, 2021. The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 and to assure banks that they will not be criticized by examiners for doing so. The Company is applying this guidance to qualifying loan modifications. See Note 1 and Note 5 to the “Notes to Consolidated Financial Statements,” which is included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further information about the COVID-19-related loan modifications completed by the company.

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  The CARES Act encouraged the Federal Reserve, in coordination with the Secretary of the Treasury, to establish or implement various programs to help midsize businesses, nonprofits, and municipalities. On April 9, 2020, the Federal Reserve proposed the creation of the Main Street Lending Program (“MSLP”) to implement certain of these recommendations. On June 15, 2020, the Federal Reserve Bank of Boston opened the MSLP for lender registration. The MSLP supports lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic.  The passage of the Economic Aid Act in December terminated the MSLP as of January 8, 2021 and no new loan applications could be submitted after December 31, 2020.

 Concurrent with the enactment of the CARES Act, 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.  Please see Note 22, “Regulatory Matters” for more information.

CONSUMER PROTECTION LAWS

In connection with its lending and leasing activities, all banks are subject to a number of federal and state laws designed to protect consumers and promote lending and other financial services to various sectors of the economy and population. These laws include the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act (“TILA”), the Truth in Savings Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act (“RESPA”), the Electronic Fund Transfer Act, and, in some cases, their respective state law counterparts. The CFPB has consolidated the authority to write regulations implementing these and other laws. Wesbanco’s other subsidiaries that provide services relating to consumer financial products and services are subject to the CFPB’s regulations. As an institution with assets of less than $10 billion, Wesbanco Bank has historically been examined by the FDIC for compliance with these rules. Through its recently completed acquisitions, the Bank’s assets have exceeded $10 billion for four consecutive quarters, and in 2019 it came under CFPB supervision and examination. Relating to mortgage lending, the Dodd-Frank Act authorized the CFPB to issue new regulations governing the ability to repay, qualified mortgages, mortgage servicing, appraisals and compensation of mortgage lenders, all of which have been issued and have taken effect. They limit the mortgage products offered by the Bank and have an impact on timely enforcement of delinquent mortgage loans.

The Dodd-Frank Act also directed the CFPB to integrate the mortgage loan disclosures under TILA and RESPA. The CFPB issued new integrated disclosures rules (“TRID”), which became effective October 3, 2015 and have combined the prior good faith estimate and truth in lending disclosure form into a new form, the loan estimate. They have also combined the HUD-1 and final truth in lending disclosure forms into a new form, the closing disclosure. The rule is extremely complex, contains significant uncertainties as to penalties, some of which can be quite material, contains prohibitions against correcting even technical mistakes, creates uncertainty regarding last minute changes in the transaction and has triggered significant ambiguity in compliance. Thus for covered transactions and most closed-end consumer credit transactions secured by real property, the TRID rules have presented significant and ongoing challenges to real estate lenders. The CFPB issued an interpretive rule in April 2020 providing greater flexibility under the TRID rules, which helped ease some of the challenges that real estate lenders like the Bank face.  The rule, however, relates only to the on-going COVID pandemic.

Federal law currently contains extensive customer privacy protection provisions. Under these provisions, a financial institution must provide to its customers, at the inception of the customer relationship and annually thereafter, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. These provisions also provide that, except for certain limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure. Federal law makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.

Community development and compliance with the Community Reinvestment Act (CRA) are vital and integrated components of the banking business at Wesbanco Bank. Wesbanco is committed to helping our communities thrive and prosper by being a leader in community development.  The foundation of our values is grounded in our belief that the success of our communities is fundamental to the success of our company. Wesbanco has proven to be a leader in the community by providing loans, deposits and other banking services that are responsive to the financial needs of the community. The CRA requires Wesbanco Bank’s primary federal bank regulatory agency, the FDIC, to assess Wesbanco Bank’s record in meeting the credit needs of the communities served by the bank, including low and moderate-income neighborhoods and persons. Institutions are assigned one of four ratings: “Outstanding,” “Satisfactory,” “Needs to Improve” or “Substantial Noncompliance.” This assessment is reviewed when a bank applies to merge or consolidate with or acquire the assets or assume the liabilities of an insured depository institution, or to open or relocate a branch office.  On December 19, 2019, the FDIC assigned a rating of “Outstanding” for the Bank’s community development performance for the period of October 2016 through July 2019.  This is the highest rating awarded by federal regulators and the 2019 exam represented the Bank’s seventh consecutive “Outstanding” CRA rating.  The Bank also received  the “America Saves Designation of Savings Excellence for Banks,” a designation from America Saves that recognizes banks that went above and beyond to encourage people to save money during America Saves Week 2020. Wesbanco has been an active participant in America Saves Week since its inception in 2007 and this was Wesbanco’s fifth consecutive designation for savings excellence.  

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To achieve this level of success, in addition to providing a wide variety of conventional loan and deposit products, the Bank partners with a number of governmental and non-profit agencies to provide special programs to assist customers, especially low- and moderate-income customers, achieve their financial goals. For example, Wesbanco Bank leverages its membership in the Federal Home Loan Bank to sponsor Affordable Housing Program grant applications for non-profit organizations and developers of affordable housing, assistance through the First Front Door down payment program, Banking on Business loans for small businesses that may not be approved for conventional bank financing, and loans through the Community Lending Program.  Additionally, Wesbanco has developed its own loan and deposit products to provide financing and savings options with innovative and flexible terms to meet identified needs.  Wesbanco has also been a leader in providing community development lending within its CRA assessment areas.  In the past five years, the Bank originated over $1 billion dollars in community development loans, returning credit and capital to communities throughout our footprint.  At the heart of Wesbanco Bank’s successful community development program is its commitment of time and resources to the communities it serves. Employees provide thousands of hours of technical assistance or financial education to organizations and agencies that promote community development and Wesbanco has deployed hundreds of thousands of dollars in philanthropic donations to worthy organizations serving local communities throughout its footprint.

The three primary banking regulators continue to prioritize CRA modernization in their respective regulatory agendas. Currently, the Federal Reserve Board and the Office of the Comptroller of the Currency have issued separate proposals to or regulations that will amend the CRA, while the FDIC has not.  

SECURITIES REGULATION

Wesbanco’s full service broker-dealer subsidiary, Wesbanco Securities, is registered as a broker-dealer with the SEC and in the states in which it does business. Wesbanco Securities also is a member of FINRA. Wesbanco Securities is subject to regulation by the SEC, FINRA and the securities administrators of the states in which it is registered. Wesbanco Securities is a member of the SIPC, which in the event of the liquidation of a broker-dealer, provides protection for customers’ securities accounts held by Wesbanco Securities of up to $500,000 for each eligible customer, subject to a limitation of $250,000 for claims for cash balances.

In addition, Wesbanco Bank’s Investment Department serves as an investment adviser to a family of mutual funds and is registered as an investment adviser with the SEC and in some states.

On September 10, 2019, the SEC adopted a new rule, Regulation Best Interest, which establishes a standard of conduct for broker-dealers when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities.  Regulation Best Interest enhances the broker-dealer standard of conduct beyond existing suitability obligations, and aligns the standard of conduct with retail customers’ reasonable expectations by requiring broker-dealers, among other things, to: act in the best interest of the retail customer at the time the recommendation is made, without placing the financial or other interest of the broker-dealer ahead of the interests of the retail customer; and address conflicts of interest by establishing, maintaining, and enforcing policies and procedures reasonably designed to identify and fully and fairly disclose material facts about conflicts of interest, and in instances where we have determined that disclosure is insufficient to reasonably address the conflict, to mitigate or, in certain instances, eliminate the conflict.  The effective date for implementation of the new rule was June 30, 2020.

On December 22, 2020, the SEC adopted a new rule to govern investment adviser advertisements and payments to solicitors.  The rule replaces the current advertising rule’s broadly drawn limitations with principles-based provisions designed to accommodate the continual evolution and interplay of technology and advice, and includes tailored requirements for certain types of advertisements. For example, the rule will require advisers to standardize certain parts of a performance presentation in order to help investors evaluate and compare investment opportunities, and will include tailored requirements for certain types of performance presentations. Advertisements that include third-party ratings will be required to include specific disclosures to prevent them from being misleading. The rule also will permit the use of testimonials and endorsements, which include traditional referral and solicitation activity, subject to certain conditions.

THE USA PATRIOT AND BANK SECRECY ACT

The USA PATRIOT Act of 2001 (the “USA Patriot Act”) imposes significant compliance and due diligence obligations, material penalties, and provides for extra-territorial jurisdiction of the United States. The U.S. Treasury Department has issued various implementing regulations, which apply certain requirements of the USA Patriot Act to financial institutions, such as Wesbanco Bank and Wesbanco’s broker-dealer subsidiary. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing, to verify the identity of their customers, including beneficial owners, and to report suspicious activities and currency transactions of a certain size. Failure of Wesbanco and its subsidiaries to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for Wesbanco and its subsidiaries.

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ITEM 1A.  RISK FACTORS

The risks described below are not the only ones we face in our business. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. If any of the following risks occur, our business, financial condition or operating results could be materially harmed.

RISKS RELATED TO THE ECONOMY AND OTHER EXTERNAL FACTORS, INCLUDING REGULATION

The COVID-19 pandemic is adversely affecting THE OPERATIONS OF us and our customers.

The spread of COVID-19 has created a global public-health crisis that has resulted in widespread volatility and deteriorations in household, business, economic, and market conditions.  This pandemic has caused many state governments to enact “shelter in place” orders and the institution of social distancing requirements, which have adversely impacted the economy due to the vast restrictions and forced closures of non-essential businesses during the quarantine periods. As a result, many of our customers have been adversely affected by business closures and/or other business restrictions.  Accordingly, COVID-19 may result in a significant decrease in our customer’ business and/or cause our customers to be unable to meet existing payment or other obligations to us.  These adverse impacts on the businesses of our customers could cause a material adverse effect to our business, financial condition, and results of operations.

ECONOMIC CONDITIONS IN WESBANCO’S MARKET AREAS COULD NEGATIVELY IMPACT EARNINGS.

Wesbanco Bank serves both individuals and business customers throughout West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana and Maryland. The substantial majority of Wesbanco’s loan portfolio is to individuals and businesses in these markets. As a result, the financial condition, results of operations and cash flows of Wesbanco are affected by local and regional economic conditions, as well as national economic conditions. A downturn in these economies could have a negative impact on Wesbanco and the ability of the Bank’s customers to repay their loans. The value of the collateral securing loans to borrowers may also decline as the economy declines. As a result, deteriorating economic conditions in these markets could cause a decline in the overall quality of Wesbanco’s loan portfolio requiring Wesbanco to charge-off a higher percentage of loans and/or increase its allowance for credit losses. A decline in economic conditions in these markets may also force customers to utilize deposits held by Wesbanco Bank in order to pay current expenses causing the Bank’s deposit base to shrink. As a result, the Bank may have to borrow funds at higher rates in order to meet liquidity needs. Lower oil and gas prices have reduced shale gas activity in the region, which somewhat negatively impacted local and regional economic conditions, affecting both commercial and retail customers, resulting in lower deposits and credit deterioration in the loan portfolio. Current prices for oil and gas have decreased over the last few years and new well production has recently decreased due to the volatile nature of these markets, potentially causing a negative impact on Wesbanco’s earnings and financial condition.

MARKET VOLATILITY AND PROLONGED PERIODS OF ECONOMIC STRESS MAY AFFECT WESBANCO’S CAPITAL AND LIQUIDITY.

The COVID-19 pandemic has caused volatility in financial markets and could potentially cause prolonged periods of economic stress. This may result in decreased capital and liquidity. In addition to the potential affects from negative economic conditions noted above, Wesbanco instituted a program to help COVID-19 impacted customers. This program allows for up to a 180 day deferral of loan principal and/or interest payments as long as the customer meets certain requirements. Depending on how many customers apply for this program, Wesbanco’s liquidity could be negatively impacted if a significant number of customers apply and are approved for the deferral of payments. In addition, if these deferrals are not effective in mitigating the effect of COVID-19 on our customers, it may adversely affect our business and results of operations more substantially over a longer period of time and additional deferrals may need to be granted on a case-by-case basis. If the economic situation deteriorates, federal and state regulators may also consider taking actions such as suspension of dividends and other capital distributions in order to conserve capital and retain capacity, any of which could adversely impact our business.

The extent to which the COVID-19 pandemic impacts our business, financial condition and results of operation, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and the efficacy of actions taken by governmental authorities and other third parties in response to the pandemic.

WESBANCO COULD BE ADVERSELY AFFECTED BY CHANGES TO THE FISCAL, POLITICAL AND OTHER FEDERAL POLICIES.

Changes in general economic or political policies in the United States or other regions could adversely impact Wesbanco’s business as well as the Bank’s customers. The current United States administration has indicated that it may propose significant changes with respect to a variety of issues, including international trade agreements, import and export regulations, tariffs and customs duties, foreign relations, tax laws, corporate governance laws and corporate fuel economy standards, that could have a positive or negative impact on Wesbanco’s business and the Bank’s customers including those in the wholesale and distribution, manufacturing and retail industries.

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WESBANCO IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND SUPERVISION.

Wesbanco is subject to extensive federal and state regulation, supervision and examination. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, rather than corporate shareholders. These regulations affect Wesbanco’s lending practices, capital structure, investment practices, dividend policy, operations and growth, among other things. These regulations also impose obligations to maintain appropriate policies, procedure and controls. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect Wesbanco in substantial and unpredictable ways. Such changes could subject Wesbanco to additional costs, limit the types of financial services and products that could be offered, and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil penalties and/or reputation damage, which could have a material adverse effect on Wesbanco’s business, financial condition and result of operations.

As of December 31, 2020, Wesbanco had $192.3 million in subordinated and junior subordinated debt presented as a separate category of long-term debt on its Consolidated Balance Sheets, which includes $132.2 million in junior subordinated debt. For regulatory purposes, Trust Preferred Securities totaling $130.0 million underlying such junior subordinated debt were previously included in Tier 1 capital in accordance with regulatory reporting requirements prior to December 31, 2019. On March 1, 2005, the Federal Reserve Board adopted a rule that retains trust preferred securities in Tier 1 capital, but with stricter quantitative limits and clearer qualitative standards. Under the rule, the aggregate amount of trust preferred securities and certain other capital elements is limited to 25% of Tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital, subject to restrictions. The Dodd-Frank Act required the federal banking agencies to develop new consolidated capital requirements applicable to bank holding companies and banks. Rules issued in 2013 generally exclude trust preferred securities from Tier 1 capital beginning in 2015. A grandfather provision permitted bank holding companies with consolidated assets of less than $15 billion to continue counting existing trust preferred securities as Tier 1 capital until maturity. As of December 31, 2019, Wesbanco’s assets were greater than $15 billion; therefore, all such securities are no longer counted as Tier 1 capital but instead are counted as Tier 2 capital subject to limits.

In addition, international capital standards known as Basel III, which were implemented by a U.S. federal banking agencies’ joint final rule issued in July 2013, and effective January 1, 2015, further increase the minimum capital requirements applicable to Wesbanco and the Bank, which may negatively impact both entities. The EGRRCPA Act, enacted into law in May 2018, exempts banks with total consolidated assets of less than $10 billion that exceed the community bank leverage ratio from the capital requirements under Basel III. Wesbanco’s assets are in excess of $10 billion, so the exemption is not applicable. Additional information about these changes in capital requirements are described above in “Item 1. Business—Capital Requirements.”

Regulation of Wesbanco and its subsidiaries is expected to continue to expand in scope and complexity in the future. These laws are expected to have the effect of increasing Wesbanco’s costs of doing business and reducing its revenues, and may limit its ability to pursue business opportunities or otherwise adversely affect its business and financial condition. The Dodd-Frank Act and other laws, as well as rules implementing or related to them, may adversely affect Wesbanco. Specifically, any governmental or regulatory action having the effect of requiring Wesbanco to obtain additional capital or increase short-term liquidity could reduce earnings and have a material dilutive effect on current shareholders, including the Dodd-Frank Act source of strength requirement that bank holding companies make capital infusions into a troubled subsidiary bank. Legislation and regulation of debit card fees, credit cards and other bank services, as well as changes in Wesbanco’s practices relating to those and other bank services, may affect Wesbanco’s revenue and other financial results. Additional information about increased regulation is provided in “Item 1. Business” under the headings “Supervision and Regulation,” “Holding Company Regulations,” “Capital Requirements,” “Dodd-Frank Act,” and “Consumer Protection Laws.”

SEVERE WEATHER, NATURAL DISASTERS, DISEASE PANDEMICS, ACTS OF WAR OR TERRORISM, AND OTHER EXTERNAL EVENTS COULD SIGNIFICANTLY ADVERSELY IMPACT WESBANCO’S BUSINESS.

The unpredictable nature of events such as severe weather, natural disasters, disease pandemics, acts of war or terrorism, and other adverse external events could have a significant impact on Wesbanco’s ability to conduct business. If any of our financial, accounting, network or other information processing systems fail or have other significant shortcomings due to external events, Wesbanco could be materially adversely affected. Third parties with which Wesbanco does business could also be sources of operational risk to Wesbanco, including the risk that the third parties’ own network and information processing systems could fail. Any of these occurrences could materially diminish Wesbanco’s ability to operate or result in potential liability to customers, reputational damage, and regulatory intervention, any of which could materially adversely affect Wesbanco. Such events could affect the stability of Wesbanco’s deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, impair Wesbanco’s liquidity, result in loss of revenue, and/or cause Wesbanco to incur additional expenses. Additional information about disease pandemics is profiled in Item 1A. Risk Factors.

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THE SOUNDNESS OF OTHER FINANCIAL INSTITUTIONS COULD ADVERSELY IMPACT WESBANCO.

Financial service institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. Wesbanco has exposure to various industries and counterparties, and Wesbanco routinely executes transactions with counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutions. As a result, a default by, or potential default by, a financial institution could result in market-wide liquidity problems, losses or other financial institution defaults. Many of these transactions could expose Wesbanco to credit risk in the event of default of our counterparty or client. These losses or defaults could adversely affect our business, financial condition, and results of operations.

CURRENT MARKET INTEREST RATES AND COST OF FUNDS MAY NEGATIVELY IMPACT WESBANCO’S BANKING BUSINESS.

Fluctuations in interest rates may negatively impact the business of the Bank. The Bank’s main source of income from operations is net interest income, which is equal to the difference between the interest income received on interest-bearing assets (usually loans and investment securities) and the interest expense incurred in connection with interest-bearing liabilities (usually deposits and borrowings). These rates are highly sensitive to many factors beyond Wesbanco’s control, including general economic conditions, both domestic and foreign, and the monetary and fiscal policies of various governmental and regulatory authorities. Wesbanco Bank’s net interest income can be affected significantly by changes in market interest rates and the shape of the yield curve. Changes in relative interest rates may reduce the Bank’s net interest income as the difference between interest income and interest expense decreases, as it did in 2020.  The COVID-19 pandemic has significantly affected the financial markets and has resulted in a number of Federal Reserve actions. Market interest rates have declined significantly. On March 3, 2020, the 10-year Treasury yield fell below 1.00% for the first time, and the Federal Reserve reduced the target federal funds rate by 50 basis points to between 1.00% to 1.25%. On March 15, 2020, the Federal Reserve further reduced the target federal funds rate by 100 basis points to between 0.00% to 0.25% and announced a $700 billion quantitative easing program in response to the expected economic downturn caused by the COVID-19 pandemic. The Federal Reserve reduced the interest that it pays on excess reserves from 1.60% to 1.10% on March 3, 2020, and then to 0.10% on March 15, 2020.  These rates have stayed at these lower levels through the remainder of 2020 since the reductions took place in March. We expect that these reductions in interest rates, especially if prolonged, could adversely affect our net interest income, margins and our profitability. The Bank has adopted asset and liability management policies to minimize the potential adverse effects of changes in interest rates on net interest income, primarily by altering the mix and maturity of loans, investments and funding sources. However, even with these policies in place, Wesbanco cannot be certain that changes in interest rates or the shape of the interest rate yield curve will not negatively impact its results of operations or financial position. Lower interest rates in 2020 caused an increase in fair value of certain lower-rate securities within our investment portfolio of which the unrealized gains were recorded in other comprehensive income.

In the current low rate and relatively flat yield curve environment, Wesbanco’s cost of funds for banking operations may not decrease at the same pace as loan and investment yields. Cost of funds may alternatively increase as a result of future general economic conditions, interest rates and competitive pressures. The Bank has traditionally obtained funds principally through deposits and borrowings from the Federal Home Loan Bank (FHLB), correspondent banks, and other wholesale borrowing sources. As a general matter, deposits are a cheaper source of funds than borrowings because interest rates paid for deposits are typically less than interest rates charged for borrowings. If, as a result of general economic conditions, market interest rates, competitive pressures or otherwise, the value of deposits at the Bank decreases relative to its overall banking operations, the Bank may have to rely more heavily on borrowings as a source of funds in the future.

INTEREST RATES ON WESBANCO’S OUTSTANDING FINANCIAL INSTRUMENTS MIGHT BE SUBJECT TO CHANGE BASED ON REGULATORY DEVELOPMENTS.

London Interbank Offered Rate (“LIBOR”) and certain other “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform. These reforms may cause such benchmarks to become unavailable, to perform differently than in the past or have other consequences, which cannot be predicted. On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. The Federal Reserve Board has identified the Secured Overnight Financing Rate (“SOFR”) as the preferred reference rate alternative to LIBOR for loan pricing and hedge accounting purposes. If LIBOR ceases to exist, if the methods of calculating LIBOR change from current methods for any reason or if the proposed replacement rate for LIBOR differs materially from LIBOR, interest rates on our floating rate obligations, loans, deposits, derivatives, and other financial instruments tied to LIBOR rates, as well as the revenue and expenses associated with those financial instruments, may be adversely affected. Further, any uncertainty regarding the continued use and reliability of LIBOR as a benchmark interest rate could adversely affect the value of our floating rate obligations, loans, deposits, derivatives, and other financial instruments tied to LIBOR rates. Additionally, the joint agency statement on November 30, 2020 addressing the LIBOR administrator’s announcement to consult on extending the publication of certain U.S. dollar LIBOR (“USD LIBOR”) tenors until June 30, 2023 notes that, even in the event of an extension, the agencies would consider the use of USD LIBOR as a reference rate after December 31, 2021 as a safety and soundness risk and that they would examine bank practices accordingly.

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SIGNIFICANT DECLINES IN U.S. AND GLOBAL MARKETS COULD HAVE A NEGATIVE IMPACT ON WESBANCO’S EARNINGS.

The capital and credit markets could experience extreme disruption. These conditions result in less liquidity, greater volatility, widening of credit spreads and a lack of price transparency in certain asset types. In many cases, markets could exert downward pressure on stock prices, security prices and credit capacity for certain issuers without regard to those issuers’ underlying financial strength. Sustained weakness in business and economic conditions in any or all of the domestic or foreign financial markets could result in credit deterioration in investment securities held by us, rating agency downgrades for such securities or other market factors that (such as lack of liquidity for re-sales, absence of reliable pricing information or unanticipated changes in the competitive market) could result in us having to recognize other-than-temporary impairment in the value of such investment securities, with a corresponding charge against earnings. Furthermore, our pension assets are primarily invested in equity and debt securities, and weakness in capital and credit markets could result in deterioration of these assets, and changes in certain key pension assumptions based on current interest rates, long-term rates of return and other economic or actuarial assumptions may increase minimum funding contributions and future pension expense. If these markets were to deteriorate further, these conditions may be material to Wesbanco’s ability to access capital and may adversely impact results of operations.

Further, Wesbanco’s trust and investment services income could be impacted by fluctuations in the securities market. A portion of this revenue is based on the value of the underlying investment portfolios. If the values of those investment portfolios decline, the Bank’s revenue could be negatively impacted.

Shelter-in-place orders and other COVID-19-related restrictions in any of Wesbanco’s markets of West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana and Maryland, will result in negative economic factors depending on the length of such government restrictions. Negative changes in economic and financial market conditions could result in additional decreases in market value of financial instruments, impairment of goodwill and intangible assets and decreases in interest income. A rise in unemployment from the forced closures of non-essential businesses and other COVID-19-related restrictions, could have a negative impact on our customers’ ability to repay their loans as well as a decrease in the customer deposit base as they use their savings to pay current expenses. This could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans, negatively impact regional economic conditions, and result in a decline in local loan demand, loan originations and deposit availability. Any one or more of these developments could have a material adverse effect on our business, financial condition and results of operations.

A HIGH PERCENTAGE OF WESBANCO’S LOAN PORTFOLIO IS IN WEST VIRGINIA, OHIO, PENNSYLVANIA, KENTUCKY, INDIANA AND MARYLAND AND IN COMMERCIAL AND RESIDENTIAL REAL ESTATE. DETERIORATIONS IN ECONOMIC CONDITIONS IN THIS AREA OR IN THE REAL ESTATE MARKET GENERALLY COULD BE MORE HARMFUL TO THE COMPANY COMPARED TO MORE DIVERSIFIED INSTITUTIONS.

As of December 31, 2020, approximately 16% of Wesbanco’s loan portfolio was comprised of residential real estate loans, and 53% was comprised of commercial real estate loans.

Inherent risks of commercial real estate (“CRE”) lending include the cyclical nature of the real estate market, construction risk and interest rate risk. The cyclical nature of real estate markets can cause CRE loans to suffer considerable distress. During these times of distress, a property’s performance can be negatively affected by tenants’ deteriorating credit strength and lease expirations in times of softening demand caused by economic deterioration or over-supply conditions. Even if borrowers are able to meet their payment obligations, they may find it difficult to refinance their full loan amounts at maturity due to declines in property value. Other risks associated with CRE lending include regulatory changes and environmental liability. Regulatory changes in tax legislation, zoning or similar external conditions including environmental liability may affect property values and the economic feasibility of existing and proposed real estate projects.

The company’s CRE loan portfolio is concentrated in West Virginia, Ohio, Pennsylvania, Kentucky, Indiana and Maryland. There is a wide variety of economic conditions within the local markets of the six states in which most of the company’s CRE loan portfolio is situated. Rates of employment, consumer loan demand, household formation, and the level of economic activity can vary widely from state to state and among metropolitan areas, cities and towns. Metropolitan markets comprise various submarkets where property values and demand can be affected by many factors, such as demographic makeup, geographic features, transportation, recreation, local government, school systems, utility infrastructure, tax burden, building-stock age, zoning and building codes, and available land for development. As a result of the high concentration of the company’s loan portfolio, it may be more sensitive, as compared to more diversified institutions, to future disruptions in and deterioration of this market, which could lead to losses, which could have a material adverse effect on the business, financial condition and results of operations of the company.  Furthermore, approximately 13% of Wesbanco’s commercial real estate portfolio is comprised of hotel loans.  In the current pandemic environment, these borrowers have been impacted from low occupancy rates due to the various stay-at-home orders and consumers’ general reluctance to travel across Wesbanco’s footprint.  There is a risk that loan modifications under the CARES Act may not be sufficient for certain loans in order to recover the full principal balance.

RISKS INHERENT IN MUNICIPAL BONDS COULD HAVE A NEGATIVE IMPACT ON WESBANCO’S EARNINGS.

As of December 31, 2020, approximately 27% of Wesbanco’s total securities portfolio was invested in municipal bonds. Although Wesbanco’s municipal portfolio is broadly spread across the U.S., any downturn in the economy of a state or municipality in which Wesbanco

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holds municipal obligations could increase the default risk of the respective debt. In addition, a portion of Wesbanco’s municipal portfolio is comprised of Build America bonds. Due to the government sequester reducing the interest subsidy that the government provides to the issuing municipalities, extraordinary redemption provisions (ERP) may be executed by the municipality if it is in their favor to do so. There is a risk that when an ERP is executed, Wesbanco may not recover its amortized cost in the bond if it was purchased at a premium. Credit risks are also prevalent when downgrades of credit ratings are issued by major credit rating agencies, which are caused by creditworthiness issues of both bond insurers and the municipality itself. Credit rating downgrades to a non-investment grade level may force Wesbanco to sell a municipal bond at a price where amortized cost may not be recovered. Rising interest rates could also cause the current market values of our municipal bond portfolio to decline as they all have a fixed interest component. Any of the above default risks, early redemption risks and credit risks could cause Wesbanco to take impairment charges, which could be significant, that would negatively impact earnings.

RISKS RELATED TO THE BUSINESS OF BANKING

CUSTOMERS MAY DEFAULT ON THE REPAYMENT OF LOANS, WHICH COULD SIGNIFICANTLY IMPACT RESULTS OF OPERATIONS THROUGH INCREASES IN THE PROVISION AND ALLOWANCE FOR CREDIT LOSSES.

The Bank’s customers may default on the repayment of loans, which may negatively impact Wesbanco’s earnings due to loss of principal and interest income. Increased operating expenses may result from the allocation of management time and resources to the collection and work-out of the loan. Collection efforts may or may not be successful causing Wesbanco to write off the loan or repossess the collateral securing the loan, which may or may not exceed the balance of the loan.

For 2020, Wesbanco maintained an allowance for credit losses, which is a reserve established through a provision for credit losses charged to expense, to provide for expected credit losses in our loan portfolio. Management has evaluated the appropriateness of the allowance for credit losses quarterly based on the loan’s amortized cost basis. The evaluation is based on Wesbanco’s actual loss experience by utilizing the probability of default (“PD”) / loss given default (“LGD”) method in conjunction with macroeconomic forecasts as well as additional qualitative factors.

Wesbanco’s regulatory agencies (FDIC for Wesbanco Bank, Inc. and the Federal Reserve for Wesbanco, Inc.) periodically review the allowance for credit losses. The regulatory agencies’ interpretations may differ from Wesbanco’s interpretations. These differences could negatively impact Wesbanco’s results of operations or financial position.

HIGHER FDIC DEPOSIT INSURANCE PREMIUMS AND ASSESSMENTS COULD ADVERSELY AFFECT WESBANCO’S FINANCIAL CONDITION.

Since crossing over $10 billion in total assets in 2018, Wesbanco Bank’s FDIC insurance premiums have increased due to a higher assessment rate based on a more complex calculation that includes Wesbanco Bank’s CAMELS ratings, its ability to withstand asset-related and funding-related stress and potential loss severity of its assets. In addition, if premium assessment rates were to further increase, it would negatively impact Wesbanco’s earnings.

RISKS RELATED TO ESTIMATES AND ASSUMPTIONS

THE CURRENT EXPECTED CREDIT LOSSES (“CECL”) ACCOUNTING STANDARD COULD RESULT IN SIGNIFICANT VOLATILITY OF THE ESTIMATION OF CREDIT LOSSES AND MAY HAVE A MATERIAL IMPACT ON OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

In September 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update, ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” which was adopted by Wesbanco as of January 1, 2020 and replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. Under the CECL model, we are required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected. The allowance for credit losses under CECL is calculated utilizing the PD / 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, loan risk grades, portfolio mix, concentrations and loan growth.  Any changes in the model inputs may create more volatility in the level of our allowance for credit losses. Any material increase in our level of allowance for credit losses or expenses incurred to determine the appropriate level of the allowance for credit losses could adversely affect our business, financial condition and results of operations.

In December 2018, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (“FDIC”) and the Office of Comptroller of the Currency (“OCC”) approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ adoption of the CECL methodology. The final rule provides banking organizations the option to phase-in, over a three-year period, the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In response to the COVID-19 pandemic, the joint federal bank regulatory agencies issued an optional extension of the regulatory capital transition, which allows for a two-year delay and then a three-year transition period from January 1, 2022 through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period includes both the initial impact of our adoption of CECL at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during each quarter of the two-year period ended December 31, 2021, (collectively, the “CECL regulatory capital transition adjustment”). Wesbanco has elected to defer the impact of CECL on its regulatory capital for two years and then will phase-in the impact of the adoption of this standard on the regulatory capital calculations over the subsequent three-year period.  

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WESBANCO MAY BE REQUIRED TO WRITE DOWN GOODWILL AND OTHER INTANGIBLE ASSETS, CAUSING ITS FINANCIAL CONDITION AND RESULTS TO BE NEGATIVELY AFFECTED.

When Wesbanco acquires a business, a portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. The amount of the purchase price which is allocated to goodwill and other intangible assets is determined by the excess of the purchase price over the net identifiable assets acquired. Wesbanco’s goodwill was approximately $1.1 billion or 40% of stockholders’ equity as of December 31, 2020 and 2019, respectively. Under current accounting standards, if Wesbanco determines that goodwill or intangible assets are impaired, it is required to write down the carrying value of these assets. Wesbanco conducts an annual review to determine whether goodwill and other identifiable intangible assets are impaired. Wesbanco completed such an impairment analysis in late 2020 and concluded that no impairment charge was necessary for the year ended December 31, 2020.  In addition, due to the pandemic’s effect on the economy in 2020, Wesbanco completed interim valuations of goodwill impairment at each quarter-end, one of which was assisted by a third party valuation firm.  None of the quarterly valuations indicated goodwill impairment. Wesbanco cannot provide assurance that it will not be required to take an impairment charge in the future. Any impairment charge would have a negative effect on its shareholders’ equity and financial results and may cause a decline in our stock price.

OPERATIONAL RISKS

DUE TO INCREASED COMPETITION, WESBANCO MAY NOT BE ABLE TO ATTRACT AND RETAIN BANKING CUSTOMERS AT CURRENT LEVELS.

Wesbanco operates in a highly competitive banking and financial industry that could become even more competitive as a result of legislative, regulatory and technological changes. Wesbanco faces banking competition in all the markets it serves from the following:

• local, regional and national banks;

• savings and loans;

• internet banks;

• credit unions;

• payday lenders and money services businesses;

• finance companies;

• online trading and robo-advisors;

• financial technology companies and other non-bank lenders; and

• brokerage firms serving Wesbanco’s market areas.

In particular, Wesbanco’s competitors include several major national financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns. Additionally, banks and other financial institutions may have products and services not offered by Wesbanco such as new payment system technologies and cryptocurrency, which may cause current and potential customers to choose those institutions. Areas of competition include interest rates for loans and deposits, efforts to obtain deposits and range and quality of services provided. Competitively priced deposits from other banks may cause a loss of deposits to be replaced by more expensive wholesale funding. Wesbanco also faces competition from financial technology (“FinTech”) companies, who may more efficiently underwrite and close small business and consumer loans as well as more quickly and efficiently open deposit accounts. In addition to providing products and services traditionally offered by banks, some FinTech companies allow customers to complete financial transactions without the need for bank intermediaries. This could result in the loss of revenue from transaction fees and fewer customer accounts. If Wesbanco is unable to attract new and retain current customers, loan and deposit growth could decrease, causing Wesbanco’s results of operations and financial condition to be negatively impacted.

WESBANCO MAY NOT BE ABLE TO EXPAND ITS TRUST AND INVESTMENT SERVICES SEGMENT AND RETAIN ITS CURRENT CUSTOMERS.

Wesbanco may not be able to attract new and retain current investment management clients due to competition from the following:

• commercial banks and trust companies;

• mutual fund companies;

• investment advisory firms;

• law firms;

• brokerage firms; and

• other financial services companies.

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Its ability to successfully attract and retain investment management clients is dependent upon its ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities. Due to changes in economic conditions, the performance of the trust and investment services segment may be negatively impacted by the financial markets in which investment clients’ assets are invested, causing clients to seek other alternative investment options. If Wesbanco is not successful, its results from operations and financial position may be negatively impacted.

FUTURE EXPANSION BY WESBANCO MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS WELL AS DILUTE THE INTERESTS OF OUR SHAREHOLDERS AND NEGATIVELY AFFECT THE PRICE OF OUR COMMON STOCK.

Wesbanco may acquire other financial institutions, or branches or assets of other financial institutions, in the future. Wesbanco may also open new branches and enter into new lines of business or offer new products or services. Any such expansion of our business will involve a number of expenses and risks, which may include:

• the time and expense associated with identifying and evaluating potential expansions;

• the potential inaccuracy of estimates and judgments used to evaluate credit, operations, management and market risk with respect to target institutions;

• the time and costs of evaluating new markets, hiring local management and opening new offices, and the delay between commencing these activities and the generation of profits from the expansion;

• the risk we could discover undisclosed liabilities resulting from any acquisitions for which we may become responsible;

• our financing of the expansion;

• the diversion of management’s attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses;

• entry into unfamiliar markets;

• the introduction of new products and services into our existing business;

• the incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations;

• the risk that benefits such as enhanced earnings that we anticipate from any new acquisitions may not develop and future results of the combined companies may be materially lower from those estimated; and

• the risk of loss of key employees and customers.

We can give no assurance that integration efforts for any future acquisitions will be successful. Our inability to successfully integrate future acquisitions could have a material adverse effect on our business, financial condition or results of operations. In addition, we may issue equity securities in connection with acquisitions, which could dilute the economic and voting interests of our existing shareholders.

No assurance can be given that Wesbanco will be successful overcoming the risks as disclosed above. The risks associated with entering into a new market and any inability to overcome these risks could have a material adverse effect on our business, financial condition or results of operations.

SUITABLE ACQUISITION OPPORTUNITIES MAY NOT BE AVAILABLE TO WESBANCO IN THE FUTURE.

Wesbanco continually evaluates opportunities to acquire other businesses. However, Wesbanco may not have the opportunity to make suitable acquisitions on favorable terms in the future, which could negatively impact the growth of its business. Wesbanco expects that other banking and financial companies, many of which have significantly greater resources, will compete to acquire compatible businesses. This competition could increase prices for acquisitions that Wesbanco would likely pursue, and its competitors may have greater resources than it does. Also, acquisitions of regulated businesses such as banks are subject to various regulatory approvals. If Wesbanco fails to receive the appropriate regulatory approvals, it will not be able to consummate an acquisition that it believes is in its best interests.

WESBANCO IS EXPOSED TO OPERATIONAL RISK THAT COULD ADVERSELY IMPACT THE COMPANY.

Wesbanco is exposed to multiple types of operational risk, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, clerical or record-keeping errors and computer or telecommunications systems malfunctions. Wesbanco’s business is dependent on the ability to process a large number of increasingly complex transactions. Wesbanco could be materially and adversely affected if employees, clients, counterparties or other third parties caused an operational breakdown or failure, as a result of either human error, fraudulent manipulation or purposeful damage to any of our operations or systems.

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LOSS OF KEY EMPLOYEES COULD IMPACT GROWTH AND EARNINGS AND MAY HAVE AN ADVERSE IMPACT ON BUSINESS.

Our operating results and ability to adequately manage our growth are highly dependent on the services, managerial abilities and performance of our key employees, including executive officers and senior management. Our success depends upon our ability to attract and retain highly skilled and qualified management, loan origination, finance, administrative, marketing and technical personnel and upon the continued contributions of management personnel. The loss of services, or the inability to successfully complete planned or unplanned transitions of key personnel approaching normal retirement age, could have an adverse impact on Wesbanco’s business, operating results and financial condition because of their skills, knowledge of the local markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel.  

LIMITED AVAILABILITY OF BORROWINGS AND LIQUIDITY FROM THE FEDERAL HOME LOAN BANK SYSTEM AND OTHER SOURCES COULD NEGATIVELY IMPACT EARNINGS.

Wesbanco Bank is currently a member bank of the Federal Home Loan Bank (“FHLB”) of Pittsburgh, and while it retains certain capital stock from the FHLB of Cincinnati and the FHLB of Indianapolis from prior bank acquisitions, it is no longer considered a member bank of such FHLBs. Membership in this system of quasi-governmental, regional home-loan oriented agency banks allows us to participate in various programs offered by the FHLB. We borrow funds from the FHLB, which are secured by a blanket lien on certain residential and commercial mortgage loans, and if applicable, investment securities with collateral values in excess of the outstanding balances. Future earnings shortfalls and minimum capital requirements of the FHLB may impact the collateral necessary to secure borrowings and limit the borrowings extended to their member banks, as well as require additional capital contributions by member banks. The FHLB’s rating assigned to Wesbanco Bank may also negatively impact the amount of term collateral and other conditions imposed by the FHLB upon Wesbanco Bank. Should these situations occur, Wesbanco’s short-term liquidity needs could be negatively impacted. If Wesbanco was restricted from using FHLB advances due to weakness in the system or with the FHLB of Pittsburgh, Wesbanco may be forced to find alternative funding sources. If Wesbanco is required to rely more heavily on higher cost funding sources, revenues may not increase proportionately to cover these costs, which would adversely affect Wesbanco’s results of operations and financial position.

WESBANCO’S FINANCIAL CONDITION AND RESULTS OF OPERATIONS DEPEND ON THE SUCCESSFUL GROWTH OF ITS SUBSIDIARIES.

Wesbanco’s primary business activity for the foreseeable future will be to act as the holding company of its banking and other subsidiaries. Therefore, Wesbanco’s future profitability will depend on the success and growth of these subsidiaries. In the future, part of Wesbanco’s growth may come from buying other banks and buying or establishing other companies. Such entities may not be profitable after they are purchased or established, and they may lose money or be dilutive to earnings per share, particularly for the first few years. A new bank or company may bring with it unexpected liabilities, bad loans, or poor employee relations, or the new bank or company may lose customers and the associated revenue. Dilution of book and tangible book value may occur as a result of an acquisition that may not be earned back for several years, if at all.

WESBANCO MAY NEED TO RAISE CAPITAL IN THE FUTURE, BUT CAPITAL MAY NOT BE AVAILABLE WHEN NEEDED OR AT ACCEPTABLE TERMS.

Federal and state banking regulators require Wesbanco and its banking subsidiary, Wesbanco Bank, to maintain adequate levels of capital to support its operations. In addition, in the future Wesbanco may need to raise additional capital to support its business or to finance acquisitions, if any, or Wesbanco may otherwise elect to raise additional capital in anticipation of future growth opportunities. Since Wesbanco’s total assets increased above $15 billion due to recent acquisitions, certain trust preferred securities are no longer included in the Tier 1 capital of the risk-based capital guidelines; however, they are counted as Tier 2 capital.

Although Wesbanco successfully raised $150 million of perpetual preferred stock in 2020, Wesbanco’s ability to raise additional Tier 1 or Tier 2 capital for parent company or banking subsidiary needs will depend on conditions at that time in the capital markets, overall economic conditions, Wesbanco’s financial performance and condition, and other factors, many of which are outside our control. There is no assurance that, if needed, Wesbanco will be able to raise additional equity or secured /unsecured debt that may count as Tier 1 or Tier 2 capital on favorable terms or at all. An inability to raise additional capital may have a material adverse effect on our ability to expand operations, and on our financial condition, results of operations and future prospects.

WESBANCO’S ABILITY TO MITIGATE RISK DEPENDS ON OUR ENTERPRISE RISK MANAGEMENT FRAMEWORK.

Wesbanco has implemented a risk appetite statement and an enterprise risk management framework to identify and manage our risk exposures while maintaining a safe and sound banking organization. This framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, legal and compliance, liquidity, market, operational, reputational and strategic risks. Included in this framework are three independent lines of defense, which allows Wesbanco to effectively govern and manage risk. If our risk management framework is not effective, Wesbanco could be exposed to unexpected losses and

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become subject to regulatory consequences, as a result of which our business, financial condition, results of operations or prospects could be materially adversely affected.

RISKS RELATED TO THE USE OF TECHNOLOGY

INTERRUPTION TO OUR INFORMATION SYSTEMS OR BREACHES IN SECURITY COULD ADVERSELY AFFECT WESBANCO’S OPERATIONS.

Wesbanco relies on information systems and communications for operating and monitoring all major aspects of business, as well as internal management functions. Any failure, interruption, intrusion or breach in security of these systems could result in failures or disruptions in the Wesbanco customer relationship, management, general ledger, deposit, loan and other systems. While Wesbanco has policies, procedures and technical safeguards designed to prevent or limit the effect of any failure, interruption, intrusion or security breach of its information systems, and also performs testing of business continuity and disaster recovery plans, there can be no absolute assurance that the above-noted issues will not occur or, if they do occur, that they will be adequately addressed.

There have been efforts on the part of third parties to breach data security at financial institutions. The ability of our customers to bank remotely, including online and through mobile devices, requires secure transmission of confidential information and increases the risk of data security breaches. Because the techniques used to attack financial services company communications and information systems change frequently (and generally increase in sophistication), often attacks are not recognized until launched against a target, may be supported by foreign governments or other well-financed entities, and may originate from less regulated and remote areas around the world, we may be unable to address these techniques in advance of attacks, including by implementing adequate preventative measures. Certain financial institutions in the United States have also experienced attacks from technically sophisticated and well-resourced third parties that were intended to disrupt normal business activities by making internet banking systems inaccessible to customers for extended periods. These “denial-of-service” attacks, if attempted, would require substantial resources to defend, and may affect customer satisfaction and behavior. Moreover, the development and maintenance of preventative and detective measures is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite our efforts, the possibility of these events occurring cannot be eliminated.

Cyber-attacks on third party retailers or other business establishments that widely accept debit card or check payments could compromise sensitive bank customer information, such as debit card and account numbers. Such an attack could result in significant costs to the bank, such as costs to reimburse customers, reissue debit cards and open new customer accounts.

The occurrence of any such failure, disruption or security breach of Wesbanco’s information systems, particularly if widespread or resulting in financial losses to our customers, could damage Wesbanco’s reputation, result in a loss of customer business, subject Wesbanco to additional regulatory scrutiny, and expose Wesbanco to civil litigation and possible financial liability. In addition, the prevalence of cyber-attacks and other efforts to breach or disrupt our systems has led, and will continue to lead, to costs to Wesbanco with respect to prevention and mitigation of these risks, as well as costs reimbursing customers for losses suffered as a result of these actions. Successful attacks or systems failures at other large financial institutions, whether or not Wesbanco is included, could lead to a general loss of customer confidence in financial institutions with a potential negative impact on Wesbanco’s business, additional demands on the part of our regulators, and increased costs to deal with risks identified as a result of the problems affecting others. The risks described above could have a material effect on Wesbanco’s business, results of operations and financial condition.

WESBANCO DEPENDS ON THIRD PARTIES FOR PROCESSING AND HANDLING OF COMPANY RECORDS AND DATA.

Wesbanco relies on software developed by third party vendors to process various transactions. These transactions include, but are not limited to, general ledger, payroll, employee benefits, trust record keeping, loan and deposit processing, merchant processing, and securities portfolio management. While Wesbanco performs a review of controls instituted by the vendors over these programs in accordance with industry standards and performs its own testing of user controls, Wesbanco must rely on the continued maintenance and improvement of these controls by the third party, including safeguards over the security of customer data. In addition, Wesbanco maintains backups of key processing output daily in the event of a failure on the part of any of these systems. Nonetheless, Wesbanco may incur a temporary disruption in its ability to conduct its business or process its transactions or incur damage to its reputation if the third party vendor, or the third party vendor’s subcontractor, fails to adequately maintain internal controls or institute necessary changes to systems. Such disruption or breach of security may have a material adverse effect on Wesbanco’s business, financial condition, and results of operations.

FAILURE TO KEEP PACE WITH TECHNOLOGICAL CHANGE COULD ADVERSELY AFFECT WESBANCO’S RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.  The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs.  Wesbanco’s future success depends, in part, upon its ability to address customer needs by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in Wesbanco’s operations.  Wesbanco may not be able to effectively implement new technology-driven products and services or be successful in marketing

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these products and services to its customers.  Failure to successfully keep pace with technological change affecting the financial services industry could negatively affect Wesbanco’s growth, revenue, and profit.

LIQUIDITY AND CAPITAL RISKS

WESBANCO HAS OUTSTANDING SECURITIES SENIOR TO OUR COMMON STOCK WHICH COULD LIMIT OUR ABILITY TO PAY DIVIDENDS ON THE COMMON STOCK.

Wesbanco has outstanding Series A Preferred Stock that is senior to our common stock and could adversely affect our ability to declare or pay dividends or distributions on our common stock.  The terms of the preferred stock offering prohibits us from declaring or paying dividends or making distributions on our common stock unless the full dividends for the most recently completed dividend period have been declared and paid, or set aside for payment, on all outstanding shares of Series A Preferred Stock. Whenever dividends on any shares of Series A Preferred Stock have not been declared and paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods (a “Nonpayment Event”), the holders of Series A Preferred Stock, voting together as a class with holders of any and all other series of voting preferred stock then outstanding would be entitled to vote for the election of a total of two additional members of our board of directors (the “Preferred Stock Directors”), provided that our board of directors shall at no time include more than two Preferred Stock Directors and that the election of any Preferred Stock Directors shall not cause us to violate the corporate governance requirements of the Nasdaq Stock Market (or any other exchange on which our securities may be listed) including the requirements that listed companies must have a majority of independent directors. In the event that the holders of the Series A Preferred Stock and other holders of voting preferred stock are entitled to vote for the election of the Preferred Stock Directors following a Nonpayment Event, the number of directors on our board of directors shall automatically increase by two, and the new directors shall be elected at a special meeting called at the request of the holders of record of at least 20% of the Series A Preferred Stock or of any other series of voting preferred stock (unless such request is received less than 90 days before the date fixed for the next annual or special meeting of the shareholders, in which event such election shall be held only at such next annual or special meeting of shareholders), and at each subsequent annual meeting. These voting rights will continue until dividends on the shares of Series A Preferred Stock and any such series of voting preferred stock for at least four consecutive dividend periods following the Nonpayment Event shall have been fully paid (or declared and a sum sufficient for the payment of such dividends shall have been set aside for payment).

WESBANCO’S ABILITY TO PAY DIVIDENDS IS LIMITED, AND COMMON STOCK DIVIDENDS MAY HAVE TO BE REDUCED OR ELIMINATED.

Subject to restrictions described in the previous risk factor, holders of shares of Wesbanco’s common stock are entitled to dividends if, when, and as declared by Wesbanco’s Board of Directors out of funds legally available for that purpose. Although the Board of Directors has declared and increased shareholder dividends in the past, the current ability to pay such dividends is largely dependent upon the receipt of dividends from the Bank. Federal and state laws impose restrictions on the ability of the Bank to pay dividends, which restrictions are more fully described in “Item 1. Business—Payment of Dividends.” In general, future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including Wesbanco’s and the Bank’s future earnings, liquidity and capital requirements, regulatory constraints and financial condition.

Volatility in the price and volume of our stock may be unfavorable.

The market price of our common stock can be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. Some of these factors include, without limitation:

•prevailing market conditions;

•our financial and operating results;

•estimates of our business potential and earnings prospects;

•an overall assessment of our management;

•changes in interest rates;

•business interruptions, such as may result from natural disasters, health concerns such as the coronavirus or other events;

•our performance relative to our peers;

•market demand for our shares;

•perceptions of the banking industry in general;

•political influences on investor sentiment; and

•consumer confidence.

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At times, the stock markets, including the NASDAQ Stock Market, on which our common stock is listed, may experience significant price and volume fluctuations. As a result, the market price of our common stock is likely to be similarly volatile and investors in our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.

In addition, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Wesbanco’s subsidiaries generally own their respective offices, related facilities and any unimproved real property held for future expansion. At December 31, 2020, Wesbanco operated 233 banking offices in West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana and Maryland, of which 164 were owned and 69 were leased. Wesbanco also operated six loan production offices leased in West Virginia, Ohio, western Pennsylvania and Maryland. These leases expire at various dates through February 2050 and generally include options to renew. The Bank also owns several regional headquarters buildings in various markets, most of which also house a banking office and/or certain back office functions.

The main office of Wesbanco is located at 1 Bank Plaza, Wheeling, West Virginia, in a building owned by the Bank. The building contains approximately 100,000 square feet and serves as the main office for both Wesbanco’s community banking segment and its trust and investment services segment, as well as its executive offices. The Bank’s major back office operations currently occupy approximately 90% of the space available in an office building connected via sky-bridge to the main office. This adjacent back office building is owned by Wesbanco Properties, Inc., a subsidiary of Wesbanco, with the remainder of the building leased to unrelated businesses.

At various building locations, Wesbanco rents or makes available commercial office space to unrelated businesses. Rental income totaled $1.8 million, $1.1 million and $1.3 million in 2020, 2019 and 2018, respectively. For additional disclosures related to Wesbanco’s properties, other fixed assets and leases, please refer to Note 6, “Premises and Equipment” in the Consolidated Financial Statements.

ITEM 3. LEGAL PROCEEDINGS

Wesbanco is also involved in lawsuits, claims, investigations and proceedings, which arise in the ordinary course of business. While any litigation contains an element of uncertainty, Wesbanco does not believe that a material loss related to such proceedings or claims pending or known to be threatened is reasonably possible.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Wesbanco’s common stock is quoted on the NASDAQ Global Select Stock Market under the symbol WSBC. The approximate number of record holders of Wesbanco’s $2.0833 par value common stock as of February 17, 2021 was 7,866. The number of holders does not include Wesbanco employees who have purchased stock or had stock allocated to them through Wesbanco’s Employee Stock Ownership and 401(k) plan (the “KSOP”). All Wesbanco employees who meet the eligibility requirements of the KSOP are included in this retirement plan.

As of December 31, 2020, Wesbanco had two active stock repurchase plans. There is a 1.0 million share plan, which was approved by the Board of Directors on October 22, 2015, and an additional plan with 1.7 million shares available to be repurchased, which was approved on December 19, 2019. Each plan provides for shares to be repurchased for general corporate purposes, which may include as a subsequent resource for potential acquisitions, shareholder dividend reinvestment and/or employee benefit plans. The timing, price and quantity of purchases are at the discretion of Wesbanco, and the plan may be discontinued or suspended at any time. The first plan has 4,457 shares remaining to repurchase, and the second plan has 1,700,000 shares remaining to repurchase.

Repurchases in the fourth quarter included open market purchases, those for the KSOP and dividend reinvestment plans, and repurchases to facilitate stock compensation transactions and related income tax withholdings.

Certain information relating to securities authorized for issuance under equity compensation plans is set forth under the heading “Equity Compensation Plan Information” in Part III, “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

The following table shows the activity in Wesbanco’s stock repurchase plan and other purchases for the quarter ended December 31, 2020:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares that May Yet Be Purchased Under the Plans
Balance at September 30, 2020								1,704,457
October 1, 2020 to October 31, 2020
Other transactions (1)		65,096	$	21.70	N/A		N/A
November 1, 2020 to November 30, 2020
Other transactions (1)		2,765		25.81	N/A		N/A
December 1, 2020 to December 31, 2020
Other transactions (1)		1,463		29.75	N/A		N/A
Fourth Quarter  2020
Other transactions (1)		69,324		22.03	N/A		N/A
Total		69,324	$	22.03		—		1,704,457

(1) Consists of open market purchases transacted for employee benefit and dividend reinvestment plans.

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The following graph shows a comparison of cumulative total shareholder returns for Wesbanco, the Russell 2000 Index and the SNL Mid Cap Bank Index. The total shareholder return assumes a $100 investment in the common stock of Wesbanco and each index since December 31, 2015 with reinvestment of dividends.

	Period Ending
Index	December 31, 2015		December 31, 2016		December 31, 2017		December 31, 2018		December 31, 2019		December 31, 2020
Wesbanco, Inc.		100.00		147.62		143.17		132.63		141.30		118.37
Russell 2000		100.00		121.31		139.08		123.76		155.35		186.36
SNL Mid Cap Bank Index		100.00		138.85		139.42		114.02		140.91		127.65

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ITEM 6. SELECTED FINANCIAL DATA

The following consolidated selected financial data is derived from Wesbanco’s audited financial statements as of and for the five years ended December 31, 2020. The following consolidated financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and the Consolidated Financial Statements and related notes included elsewhere in this report. Wesbanco’s acquisitions during the five years ended December 31, 2020 include OLBK on November 22, 2019, Farmers Capital Bank Corporation (“FFKT”) on August 20, 2018, First Sentry Bancshares (“FTSB”) on April 5, 2018 and Your Community Bankshares (“YCB”) on September 9, 2016 and include the results of operations since the date of acquisition.

	For the years ended December 31,
(dollars in thousands, except shares and per share amounts)	2020			2019			2018			2017			2016
PER COMMON SHARE INFORMATION
Earnings per common share—basic	$	1.78		$	2.83		$	2.93		$	2.15		$	2.16
Earnings per common share—diluted		1.77			2.83			2.92			2.14			2.16
Earnings per common share—diluted, excluding certain    items (1)(2)		1.88			3.06			3.21			2.45			2.37
Dividends declared per common share		1.28			1.24			1.16			1.04			0.96
Book value at year end		38.84			38.24			36.24			31.68			30.53
Tangible book value at year end (1)		21.75			21.55			19.63			18.42			17.19
Average common shares outstanding—basic		67,260,796			56,108,084			48,889,041			44,003,208			40,100,320
Average common shares outstanding—diluted		67,310,584			56,214,364			49,022,990			44,075,293			40,127,076
Period end common shares outstanding		67,254,706			67,824,428			54,598,134			44,043,244			43,931,715
Period end preferred shares outstanding		150,000			—			—			—			—
SELECTED BALANCE SHEET INFORMATION
Securities	$	2,722,069		$	3,257,654		$	3,146,800		$	2,284,822		$	2,316,214
Loans held for sale		168,378			43,013			8,994			20,320			17,315
Net portfolio loans		10,603,406			10,215,556			7,607,333			6,296,157			6,205,762
Total assets		16,425,610			15,720,112			12,458,632			9,816,178			9,790,877
Deposits		12,429,373			11,004,006			8,831,633			7,043,588			7,040,879
Total FHLB and other short-term borrowings		790,953			1,697,977			1,344,696			1,133,008			1,168,322
Subordinated debt and junior subordinated debt		192,291			199,869			189,842			164,327			163,598
Shareholders’ equity		2,756,737			2,593,921			1,978,827			1,395,321			1,341,408
SELECTED RATIOS
Return on average assets		0.73	%		1.24	%		1.26	%		0.96	%		0.97	%
Return on average assets, excluding certain items (1)(2)		0.77			1.34			1.39			1.09			1.07
Return on average tangible assets (1)		0.85			1.40			1.40			1.05			1.06
Return on average tangible assets, excluding certain    items (1)(2)		0.90			1.51			1.53			1.20			1.16
Return on average equity		4.50			7.49			8.68			6.83			7.13
Return on average equity, excluding certain items (1)(2)		4.79			8.11			9.54			7.79			7.83
Return on average tangible equity (1)		8.61			14.01			16.24			12.23			12.73
Return on average tangible equity, excluding certain    items (1)(2)		9.47			15.10			17.78			13.90			13.96
Return on average tangible common equity (1)		8.94			14.01			16.24			12.23			12.73
Return on average tangible common equity, excluding certain    items (1)(2)		9.47			15.10			17.78			13.90			13.96
Net interest margin (3)		3.37			3.62			3.52			3.44			3.32
Efficiency ratio (1)		56.38			56.68			54.60			56.44			56.69
Average loans to average deposits		91.66			88.59			87.60			89.86			85.79
Allowance for credit losses - loans to total loans		1.72			0.51			0.64			0.71			0.70
Allowance for credit losses - loans to total non-performing loans		455.38			104.14			134.31			104.35			110.76
Non-performing assets to total assets		0.25			0.35			0.35			0.50			0.49
Net loan charge-offs to average loans		0.06			0.09			0.06			0.13			0.12
Average shareholders’ equity to average assets		16.13			16.49			14.54			14.04			13.60

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	For the years ended December 31,
(dollars in thousands, except shares and per share amounts)	2020			2019			2018			2017			2016
Tangible equity to tangible assets (1)		10.52	%		10.02	%		9.28	%		8.79	%		8.20	%
Tangible common equity to tangible assets (1)		9.58			10.02			9.28			8.79			8.20
Tier 1 leverage ratio		10.51			11.30			10.74			10.39			9.81
Tier 1 capital to risk-weighted assets		14.72			12.89			15.09			14.12			13.16
Total capital to risk-weighted assets		17.58			15.12			15.99			15.16			14.18
Common equity tier 1 capital ratio (CET 1)		13.40			12.89			13.14			12.14			11.28
Dividend payout ratio		72.32			43.82			39.73			48.60			44.44
Trust assets at market value (4)	$	5,025,565		$	4,719,966		$	4,269,961		$	3,943,519		$	3,723,142

(1) See non-GAAP Measures with this “Item 6. Selected Financial Data” for additional information relating to the calculation of this item.

(2) Certain items excluded from the calculation consist of after-tax restructuring and merger-related expenses and the net deferred tax asset revaluation.

(3) Presented on a fully taxable-equivalent (FTE) and annualized basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21% for 2020, 2019 and 2018, and 35% for each prior period presented. Wesbanco believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.

(4) Trust assets are held by the Bank, in fiduciary or agency capacities for its customers and therefore are not included as assets on Wesbanco’s Consolidated Balance Sheets.

	For the years ended December 31,
(dollars in thousands, except per share amounts)	2020		2019		2018		2017		2016
SUMMARY STATEMENTS OF INCOME
Interest and dividend income	$	541,277	$	484,253	$	414,957	$	332,424	$	286,097
Interest expense		61,797		84,349		67,721		42,129		32,767
Net interest income		479,480		399,904		347,236		290,295		253,330
Provision for credit losses		107,741		11,198		7,764		9,986		8,478
Net interest income after provision for credit losses		371,739		388,706		339,472		280,309		244,852
Non-interest income		128,185		116,716		100,276		88,840		81,499
Non-interest expense		354,845		312,208		265,224		220,860		208,680
Income before provision for income taxes		145,079		193,214		174,524		148,289		117,671
Provision for income taxes		23,035		34,341		31,412		53,807		31,036
Net income		122,044		158,873		143,112		94,482		86,635
Preferred stock dividends		2,644		—		—		—		—
Net income available to common shareholders	$	119,400	$	158,873	$	143,112	$	94,482	$	86,635
Earnings per common share—basic	$	1.78	$	2.83	$	2.93	$	2.15	$	2.16
Earnings per common share—diluted	$	1.77	$	2.83	$	2.92	$	2.14	$	2.16

Non-GAAP Measures

The following non-GAAP financial measures used by Wesbanco provide information that Wesbanco believes is useful to investors in understanding Wesbanco’s operating performance and trends, and facilitates comparisons with the performance of Wesbanco’s peers. The following tables summarize the non-GAAP financial measures derived from amounts reported in Wesbanco’s financial statements.

	For the years ended December 31,
(dollars in thousands, except per share amounts)	2020			2019			2018			2017			2016
Tangible common equity to tangible assets:
Total shareholders’ equity	$	2,756,737		$	2,593,921		$	1,978,827		$	1,395,321		$	1,341,408
Less: goodwill and other intangible assets, net of deferred tax liability		(1,149,161	)		(1,132,262	)		(906,887	)		(583,903	)		(586,403	)
Tangible equity		1,607,576			1,461,659			1,071,940			811,418			755,005
Less: preferred shareholders' equity		(144,484	)		—			—			—			—
Tangible common equity		1,463,092			1,461,659			1,071,940			811,418			755,005
Total assets		16,425,610			15,720,112			12,458,632			9,816,178			9,790,877
Less: goodwill and other intangible assets, net of deferred tax liability		(1,149,161	)		(1,132,262	)		(906,887	)		(583,903	)		(586,403	)
Tangible assets	$	15,276,449		$	14,587,850		$	11,551,745		$	9,232,275		$	9,204,474
Tangible equity to tangible assets		10.52	%		10.02	%		9.28	%		8.79	%		8.20	%
Tangible common equity to tangible assets		9.58	%		10.02	%		9.28	%		8.79	%		8.20	%

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	For the years ended December 31,
(dollars in thousands, except per share amounts)	2020			2019			2018			2017			2016
Tangible book value per share:
Total shareholders’ equity	$	2,756,737		$	2,593,921		$	1,978,827		$	1,395,321		$	1,341,408
Less: goodwill and other intangible assets, net of deferred tax liability		(1,149,161	)		(1,132,262	)		(906,887	)		(583,903	)		(586,403	)
Less: preferred shareholders' equity		(144,484	)		—			—			—			—
Tangible common equity		1,463,092			1,461,659			1,071,940			811,418			755,005
Common shares outstanding		67,254,706			67,824,428			54,598,134			44,043,244			43,931,715
Tangible book value per share at year end	$	21.75		$	21.55		$	19.63		$	18.42		$	17.19
Return on average tangible equity:
Net income available to common shareholders	$	119,400		$	158,873		$	143,112		$	94,482		$	86,635
Add: amortization of intangibles, net of tax		10,595			8,169			5,514			3,211			2,339
Net income available to common shareholders before amortization of intangibles		129,995			167,042			148,626			97,693			88,974
Average total shareholders’ equity		2,651,402			2,119,995			1,648,425			1,383,935			1,215,888
Less: average goodwill and other intangibles, net of deferred tax liability		(1,141,528	)		(927,974	)		(732,978	)		(584,885	)		(516,840	)
Average tangible equity	$	1,509,874		$	1,192,021		$	915,447		$	799,050		$	699,048
Return on average tangible equity		8.61	%		14.01	%		16.24	%		12.23	%		12.73	%
Average tangible common equity	$	1,453,363		$	1,192,021		$	915,447		$	799,050		$	699,048
Return on average tangible common equity		8.94	%		14.01	%		16.24	%		12.23	%		12.73	%
Return on average tangible assets:
Net income available to common shareholders	$	119,400		$	158,873		$	143,112		$	94,482		$	86,635
Add: amortization of intangibles, net of tax		10,595			8,169			5,514			3,211			2,339
Net income before amortization of intangibles		129,995			167,042			148,626			97,693			88,974
Average total assets		16,442,704			12,853,920			11,337,379			9,854,312			8,939,886
Less: average goodwill and other intangibles, net of deferred tax liability		(1,141,528	)		(927,974	)		(732,978	)		(584,885	)		(516,840	)
Average tangible assets	$	15,301,176		$	11,925,946		$	10,604,401		$	9,269,427		$	8,423,046
Return on average tangible assets		0.85	%		1.40	%		1.40	%		1.05	%		1.06	%
Efficiency ratio:
Non-interest expense	$	354,845		$	312,208		$	265,224		$	220,860		$	208,680
Less: restructuring and merger-related expense		(9,725	)		(16,397	)		(17,860	)		(945	)		(13,261	)
Non-interest expense excluding restructuring and merger-related expense		345,120			295,811			247,364			219,915			195,419
Net interest income on a fully-taxable equivalent basis		483,999			405,222			352,760			300,789			263,232
Non-interest income		128,185			116,716			100,276			88,840			81,499
Net interest income on a fully-taxable equivalent basis plus non-interest income	$	612,184		$	521,938		$	453,036		$	389,629		$	344,731
Efficiency ratio		56.38	%		56.68	%		54.60	%		56.44	%		56.69	%
Net income per common shareholders, excluding net deferred tax asset revaluation and after-tax restructuring and merger-related expenses:
Net income available to common shareholders	$	119,400		$	158,873		$	143,112		$	94,482		$	86,635
Add: net deferred tax asset revaluation		—			—			—			12,780			—
Add: after-tax restructuring and merger-related expenses (1)		7,683			12,954			14,109			614			8,619
Net income per common shareholders, excluding net deferred tax asset revaluation and after-tax restructuring and merger-related expenses	$	127,083		$	171,827		$	157,221		$	107,876		$	95,254

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	For the years ended December 31,
(dollars in thousands, except per share amounts)	2020			2019			2018			2017			2016
Net income per common share - diluted, excluding net deferred tax asset revaluation and after-tax restructuring and merger-related expenses:
Net income per common share - diluted	$	1.77		$	2.83		$	2.92		$	2.14		$	2.16
Add: net deferred tax asset revaluation per diluted share		—			—			—			0.29			—
Add: after-tax restructuring and merger-related expenses per diluted share (1)		0.11			0.23			0.29			0.02			0.21
Net income per common share - diluted, excluding net deferred tax asset revaluation and after-tax restructuring and merger-related expenses	$	1.88		$	3.06		$	3.21		$	2.45		$	2.37
Return on average equity, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation:
Net income available to common shareholders	$	119,400		$	158,873		$	143,112		$	94,482		$	86,635
Add: after-tax restructuring and merger-related expenses (1)		7,683			12,954			14,109			614			8,619
Add: net deferred tax asset revaluation		—			—			—			12,780			—
Net income available to common shareholders, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation		127,083			171,827			157,221			107,876			95,254
Average total shareholders’ equity	$	2,651,402		$	2,119,995		$	1,648,425		$	1,383,935		$	1,215,888
Return on average equity, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation		4.79	%		8.11	%		9.54	%		7.79	%		7.83	%
Return on average tangible equity, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation:
Net income available to common shareholders	$	119,400		$	158,873		$	143,112		$	94,482		$	86,635
Add: after-tax restructuring and merger-related expenses (1)		7,683			12,954			14,109			614			8,619
Add: net deferred tax asset revaluation		—			—			—			12,780			—
Add: amortization of intangibles, net of tax		10,595			8,169			5,514			3,211			2,339
Net income available to common shareholders before amortization of intangibles and excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation		137,678			179,996			162,735			111,087			97,593
Average total shareholders’ equity		2,651,402			2,119,995			1,648,425			1,383,935			1,215,888
Less: average goodwill and other intangibles, net of deferred tax liability		(1,141,528	)		(927,974	)		(732,978	)		(584,885	)		(516,840	)
Average tangible equity	$	1,509,874		$	1,192,021		$	915,447		$	799,050		$	699,048
Return on average tangible equity, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation		9.12	%		15.10	%		17.78	%		13.90	%		13.96	%
Average tangible common equity	$	1,453,363		$	1,192,021		$	915,447		$	799,050		$	699,048
Return on average tangible common equity, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation		9.47	%		15.10	%		17.78	%		13.90	%		13.96	%

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	For the years ended December 31,
(dollars in thousands, except per share amounts)	2020			2019			2018			2017			2016
Return on average assets, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation:
Net income available to common shareholders	$	119,400		$	158,873		$	143,112		$	94,482		$	86,635
Add: after-tax merger-related expenses (1)		7,683			12,954			14,109			614			8,619
Add: net deferred tax asset revaluation		—			—			—			12,780			—
Net income available to common shareholders, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation		127,083			171,827			157,221			107,876			95,254
Average total assets	$	16,442,704		$	12,853,920		$	11,337,379		$	9,854,312		$	8,939,886
Return on average tangible assets, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation		0.77	%		1.34	%		1.39	%		1.09	%		1.07	%
Return on average tangible assets, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation:
Net income available to common shareholders	$	119,400		$	158,873		$	143,112		$	94,482		$	86,635
Add: amortization of intangibles, net of tax		10,595			8,169			5,514			3,211			2,339
Add: restructuring and after-tax merger-related expenses (1)		7,683			12,954			14,109			614			8,619
Add: net deferred tax asset revaluation		—			—			—			12,780			—
Net income available to common shareholders, before amortization of intangibles and excluding restructuring and after-tax merger-related expenses and net deferred tax asset revaluation		137,678			179,996			162,735			111,087			97,593
Average total assets		16,442,704			12,853,920			11,337,379			9,854,312			8,939,886
Less: average goodwill and other intangibles, net of deferred tax liability		(1,141,528	)		(927,974	)		(732,978	)		(584,885	)		(516,840	)
Average tangible assets	$	15,301,176		$	11,925,946		$	10,604,401		$	9,269,427		$	8,423,046
Return on average tangible assets, excluding after-tax restructuring and merger-related expenses and net deferred tax asset revaluation		0.90	%		1.51	%		1.53	%		1.20	%		1.16	%
Dividend payout ratio, excluding after-tax restructuring and merger related expenses and net deferred tax asset revaluation:
Dividends declared per common share	$	1.28		$	1.24		$	1.24		$	1.16		$	1.04
Net income per common share - diluted		1.77			2.83			2.92			2.14			2.16
Add: net deferred tax asset revaluation per diluted share		—			—			—			0.29			—
Add: restructuring and after-tax merger-related expenses per diluted share (1)		0.11			0.23			0.29			0.02			0.21
Net income per common share - diluted, excluding net deferred tax asset revaluation and after-tax restructuring and merger-related expenses	$	1.88		$	3.06		$	3.21		$	2.45		$	2.37
Dividend payout ratio, excluding after-tax restructuring and merger related expenses and net deferred tax asset revaluation:		68.09			40.52			38.63			47.35			43.88

(1) Tax effected at 21% for the periods in 2020, 2019 and 2018, and 35% for all prior periods.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis represents an overview of the results of operations and financial condition of Wesbanco. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto. This section generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of Wesbanco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on February 28, 2020.

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-Qs for the prior quarters ended March 31, June 30 and September 30, 2020, respectively, and documents subsequently filed by Wesbanco which are available at the SEC’s website, www.sec.gov or at Wesbanco’s website, www.wesbanco.com. Investors are cautioned that forward-looking statements, which are not historical fact, involve risks and uncertainties, including those detailed under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements, including, without limitation, the effects of changing regional and national economic conditions including the effects of the COVID-19 pandemic; 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, the FDIC, the SEC, FINRA, the Municipal Securities Rulemaking Board, the SIPC, 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.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Wesbanco’s Consolidated Financial Statements are prepared in accordance with U.S. GAAP and follow general practices within the industries in which it operates. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.

The most significant accounting policies followed by Wesbanco are included in Note 1, “Summary of Significant Accounting Policies,” of the Consolidated Financial Statements. These policies, along with other Notes to the Consolidated Financial Statements and this MD&A, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Management has identified the allowance for credit losses, the evaluation of goodwill and other intangible assets for impairment and business combinations to be the accounting estimates that require the most subjective or complex judgments, and as such could be most subject to revision as new information becomes available.

Allowance for Credit Losses— In September 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326),” which require entities to use a new forward-looking “expected loss” model, also referred to as the current expected credit loss model (“CECL”) on trade and other receivables, held-to-maturity debt securities, loans and other instruments that generally will result in the earlier recognition of allowances for credit losses.  For available-for-sale debt securities with unrealized losses, entities measure credit losses in a manner similarly to current procedures, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.  Entities will have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments” and in May 2019 the FASB issued ASU 2019-05, “Financial Instruments – Credit Losses (Topic 326), Targeted Transition Relief. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which for Wesbanco was effective January 1, 2020.  In December 2018, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (“FDIC”) and the Office of Comptroller of the Currency (“OCC”) approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ adoption of the CECL methodology. The final rule provides banking organizations the option to phase-in, over a three-year period, the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In response to the COVID-19 pandemic, the joint federal bank regulatory agencies issued an optional extension of the regulatory capital transition, which allows for a two-year delay and then a three-year transition period from January 1, 2022 through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period includes both the initial impact of our adoption of CECL at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during each

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quarter of the two-year period ended December 31, 2021, (collectively, the “CECL regulatory capital transition adjustment”). Wesbanco has elected to defer the impact of CECL on its regulatory capital for two years and then will phase-in the impact of the adoption of this standard on the regulatory capital calculations over the subsequent three-year period.

Under CECL, acquired loans or pools of loans that have experienced more-than-insignificant credit deterioration are deemed to be purchased credit-deteriorated (“PCD”) loans, and are grossed-up on day 1 by the initial credit estimate through the allowance as opposed to a reduction in the loan’s amortized cost. The credit mark on acquired loans deemed not to be PCD loans are reflected as a reduction in the loan’s amortized cost, with an allowance and corresponding provision for credit losses recorded in the first reporting period after acquisition through current period earnings, while the loan mark will accrete through interest income over the life of such loans. At acquisition, Wesbanco will consider several factors as indicators that an acquired loan or pool of loans has experienced more-than-insignificant credit deterioration. These factors may include, but are not limited to, loans 30 days or more past due, loans with an internal risk grade of below average or lower, loans classified as non-accrual by the acquired institution, materiality of the credit and loans that have been previously modified in a troubled debt restructuring (“TDR”). Upon adoption of this standard, acquired loans from prior acquisitions that met the guidelines under ASC 310-30 (formerly known as “purchased credit-impaired”) were reclassified as PCD loans. The accretable portion of the loan mark as of adoption date continues to accrete into interest income. However, the non-accretable portion of the loan mark was added to the allowance upon adoption, and any reversals of such mark will flow through the allowance in future periods. The loan mark on ASC 310-20 loans (“non-purchased credit-impaired”) from prior acquisitions continues to accrete through interest income over the life of such loans.

The day 1 impact on the allowance for credit losses was $41.4 million, which included a $6.7 million adjustment for PCD loans and a $3.0 million adjustment related to loan commitments. The after-tax effect on retained earnings was $26.6 million as of January 1, 2020. The day 1 CECL calculation was derived from the selected assumption of a one-year reasonable and supportable forecast, which was obtained from a third-party vendor. After the forecast period, Wesbanco reverts back over a one-year period to historical loss rates adjusting for prepayments and curtailments, to estimate losses over the remaining life of loans. The most sensitive assumptions include the length of the forecast and reversion periods, forecast of unemployment and interest rate spreads and prepayment speeds. See Note 5, “Loans and Allowance for Credit Losses” for further detail.

The allowance for credit losses specific to loans reduces the loan portfolio to the net amount expected to be collected, representing the lifetime expected credit losses at the initial origination date. Similarly, an allowance for unfunded loan commitments, which is recorded in other liabilities, represents expected losses on unfunded commitments. Fluctuations in the allowance for credit losses specific to loans, the allowance for unfunded loan commitments, and the allowance for held-to-maturity debt securities are recognized in the provision for credit losses on the consolidated statement of operations. The allowance incorporates forward-looking information and applies a reversion methodology beyond the reasonable and supportable forecast. The allowance is increased by a provision charged to operating expense and reduced by charge-offs, net of recoveries.  Management evaluates the appropriateness of the allowance at least quarterly.  This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change from period to period. 

The allowance for credit loss calculation specific to loans is based on the loan’s amortized cost basis, which is comprised of the unpaid principal balance of the loan, deferred loan fees (costs) and acquired premium (discount) minus any write-downs. Wesbanco made an accounting policy election to exclude accrued interest from the measurement of the allowance for credit losses, because the Company has a robust policy in place to reverse or write-off accrued interest when the loan is placed on non-accrual, and also made an accounting policy election to reverse accrued interest deemed uncollectible as a reversal of interest income.  However, Wesbanco is reserving, as part of the allowance for credit losses, for accrued interest on loan modifications under the CARES Act due to the nature and timing of these deferrals.

The allowance for credit loss specific to loans reflects the risk of loss in the loan portfolio. To appropriately measure expected credit losses, management disaggregates the loan portfolio into pools of similar risk characteristics. The Company utilizes the probability of default (“PD”) / loss given default (“LGD”) approach to calculate the expected loss for each segment, which is then discounted to net present value. PD is the probability the asset will default within a given timeframe and LGD is the percentage of the assets not expected to be collected due to default. The primary macroeconomic drivers of the quantitative model include forecasts of national unemployment and interest rate spreads.  Management relies on macroeconomic forecasts obtained from various reputable sources, which may include the Federal Open Market Committee (FOMC) forecast and other third party forecasts from well recognized, leading economists.  These forecasts can range from one to two years, depending upon the facts and circumstances of the current state of the economy, portfolio segment and management’s judgement of what can be reasonably supported.  The model reversion period may range from one to three years.

The allowance for credit losses specific to loans is calculated over the loan’s contractual life. For term loans, the contractual life is calculated based on the maturity date. For commercial and industrial (“C&I”) revolving loans with no stated maturity date, the contractual life is calculated based on the internal review date. For all other revolving loans, the contractual life is based on either the estimated maturity date or a default date. The contractual term does not include any expected extensions, renewals or modifications unless management has a reasonable expectation as of the reporting period that Wesbanco will execute a troubled debt restructuring, TDR, with the borrower. Management assumes a loan will become a TDR if a loan has matured, has a principal balance, and has previously been partially charged-off. This assumption extends the maturity of these loans to six months beyond their respective maturity dates.

Contractual terms are adjusted for estimated prepayments to arrive at expected cash flows. Wesbanco models term loans with an annualized “prepayment” rate. When Wesbanco has a specific expectation of differing payment behavior for a given loan, the loan may be evaluated individually. For revolving loans that do not have a principal payment schedule, a curtailment rate is factored into the cash flow.

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The evaluation also considers qualitative factors such as economic trends and conditions, which includes levels of regional unemployment, real estate values and the impact on specific industries and geographical markets, changes in lending policies and underwriting standards, delinquency and other credit quality trends, concentrations of credit risk, if any, volume of activity, changes in lending staff, type of collateral and the results of internal loan reviews and examinations by bank regulatory agencies. Management relies on observable data from internal and external sources to the extent it is available to evaluate each of these factors and adjusts the actual historical loss rates to reflect the impact these factors may have on probable losses in the portfolio. Due to the current economic environment caused by the pandemic, management has included COVID-19 pandemic factors related to the transient credit risk not covered by the traditional allowance process, adjusted to Wesbanco’s regional footprint, deferred interest on modified loans, and hospitality industry concentration.

Commercial loans, including commercial real estate (“CRE”) and C&I, are individually-evaluated if they have unique characteristics, reported as TDRs, or reported as non-accrual loans and greater than $1 million in balance.  Specific reserves are established when appropriate for such loans based on the net present value of expected future cash flows of the loan or the estimated realizable value of the collateral, if any.

On March 27, 2020, the CARES Act was signed into law. Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” allows financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. On April 7, 2020, the joint federal regulatory agencies issued a statement, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised),” which further discusses loan modifications related to COVID-19. Wesbanco has extended loan principal and/or interest payments up to 180 days for customers affected by the COVID-19 pandemic. These customers must meet certain criteria, such as being in good standing and not more than 30 days past due either as of December 31, 2019, or as of the implementation of the modification program under the Interagency Statement, as well as other requirements noted in the regulatory agencies’ revised statement. Based on the CARES Act provision and the guidance noted above, Wesbanco does not classify the COVID-19 loan modifications as TDRs, nor are the customers considered late with regard to their delayed payments to the extent they meet the criteria. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it was determined upon entry into the program.

On August 3, 2020, the joint federal regulatory agencies issued a statement, “Joint Statement on Additional Loan Accommodations Related to COVID-19”. This statement provides financial institutions with considerations for certain customers nearing the end of their COVID-19 loan deferral period noted above.  As per this guidance and in accordance with the CARES Act noted above, Wesbanco developed a plan to assist certain customers with additional deferrals of principal and/or interest. This plan, mostly relating to existing commercial loans in the hospitality sector, may provide certain relief to these portfolio loans if they meet certain criteria regarding the borrower, underlying property and potential guarantors / co-borrowers. If a loan meets the criteria, it would be eligible to have twelve months of interest payments deferred or three months of principal and interest payments plus nine months of interest only payments. There are predetermined financial triggers reviewed throughout the deferred period to determine if a borrower should return to a normal amortization schedule prior to the completion of the twelve months.

On December 27, 2020, the Economic Aid Act was enacted, which reauthorizes lending under the PPP loan program of the CARES Act through March 31, 2021, and among other things, modifies provisions related to making PPP loans and forgiveness of PPP loans, and authorizes second draw PPP loans for borrowers that previously received a PPP loan.

Goodwill and Other Intangible Assets— Wesbanco accounts for business combinations using the acquisition method of accounting. Accordingly, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest of an acquired business are recorded at their estimated fair values as of the date of acquisition with any excess of the cost of the acquisition over the fair value recorded as goodwill. Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. As of December 31, 2020, the carrying value of goodwill and other intangibles was $1,096.8 million and $66.3 million, respectively, which represents approximately 39.8% and 2.4% of total shareholders’ equity, respectively. As of December 31, 2020, Wesbanco’s Community Banking segment had two reporting units with goodwill.

Goodwill is not amortized but is evaluated for impairment annually, or more often if events or circumstances indicate it may be impaired. Finite-lived intangible assets, which consist primarily of core deposit and customer list intangibles (long-term customer-relationship intangible assets) are amortized using straight-line and accelerated methods over their weighted-average estimated useful lives, ranging from ten to sixteen years in total, and are tested for impairment whenever events or circumstances indicate that their carrying amount may not be recoverable. Non-compete agreements are recognized in other assets on the balance sheet and are amortized on a straight-line basis over the life of the respective agreements, ranging from one to four years.

Wesbanco evaluates goodwill for impairment by determining if the fair value is greater than the carrying value of its reporting units. Wesbanco uses market capitalization, multiples of tangible book value, a discounted cash flow model, and various other market-based methods to estimate the current fair value of its reporting units. In particular, the discounted cash flow model includes various assumptions regarding an investor’s required rate of return on Wesbanco common stock, future loan loss provisions, future market spreads and net interest margins, along with various growth and economic recovery and stabilization assumptions of the economy as a whole. The resulting fair values of each method are then weighted based on the relevance and reliability of each respective method in light of the current economic environment to arrive at a weighted average fair value. The evaluation also considered macroeconomic conditions such as the general economic outlook, regional and national unemployment rates, and recent trends in equity and credit markets. Additionally, industry and market considerations, such as

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market-dependent multiples and metrics relative to peers, were evaluated. Wesbanco also considered recent trends in credit quality, overall financial performance, stock price appreciation, internal forecasts and various other market-based methods to estimate the current fair value of its reporting units. Since adopting Accounting Standards Update (“ASU”) 2017-04, “Intangibles-Goodwill and Other (Topic 350)”, the impairment charge is based on the excess of a reporting unit’s carrying amount over its fair value.

Wesbanco completed its annual goodwill impairment testing as of November 30, 2020 utilizing a quantitative assessment and concluded that goodwill at the reporting units was not impaired as of November 30, 2020.Additionally, Wesbanco determined that goodwill was not impaired as of December 31, 2020 as there were no significant changes in market conditions, consolidated operating results, or forecasted future results from November 30, 2020. Due to the pandemic’s effect on the economy in 2020, Wesbanco completed interim valuations of goodwill impairment at each quarter end, one of which was assisted by a third party valuation firm.  None of the quarterly valuations during 2020 indicated goodwill impairment.

Intangible assets with finite useful lives are evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset with a finite useful life is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the fair value of the asset. Wesbanco does not have any indefinite-lived intangible assets. Intangible assets with finite useful lives as of December 31, 2020 are comprised of $64.5 million in core deposit intangibles held at the community banking segment and $1.8 million in trust customer relationship intangibles held at the trust and investment services segment. As of December 31, 2020, there were no indicators of impairment related to intangible assets with finite useful lives.

Business Combinations— Business combinations are accounted for by applying the acquisition method. As of acquisition date, the identifiable assets acquired and liabilities assumed are measured at fair value and recognized separately from goodwill. Results of operations of the acquired entities are included in the consolidated statement of income from the date of acquisition. The calculation of intangible assets including core deposits and the fair value of loans are based on significant judgements. Core deposits intangibles are calculated using a discounted cash flow model based on various factors including discount rate, attrition rate, interest rate, cost of alternative funds and net maintenance costs.

Loans acquired in connection with acquisitions are recorded at their acquisition-date fair value with no carryover of related allowance for credit losses. Any allowance for loan loss on these pools reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not to be received). Determining the fair value of the acquired loans involves estimating the principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Management considers a number of factors in evaluating the acquisition-date fair value including the remaining life of the acquired loans, delinquency status, estimated prepayments, payment options and other loan features, internal risk grade, estimated value of the underlying collateral and interest rate environment.

EXECUTIVE OVERVIEW

On November 22, 2019, Wesbanco consummated the merger with Old Line Bancshares, Inc. (“OLBK”), a bank holding company headquartered in Bowie, MD with approximately $3.0 billion in assets, excluding goodwill.  

Net income available to common shareholders decreased $39.5 million or 24.8% to $119.4 million in 2020 compared to 2019. Net income available to common shareholders excluding after-tax restructuring and merger-related expenses (non-GAAP measure) decreased $44.7 million or 26.0% to $127.1 million.  These decreases reflected the impact of the 2020 adoption of the new CECL accounting standard and the impact of the current economic environment on the provision for credit losses. Net interest income improved $79.6 million or 19.9%, primarily through a 28.3% increase in average earning assets from the OLBK acquisition, partially offset by a 25 basis point decrease in the net interest margin to 3.37%.  The net interest margin decreased specifically due to the lower interest rate environment from the five decreases in the Federal Reserve Board’s target federal funds rate, totaling 225 basis points, from July 2019 through March 2020, which was partially offset by lower funding costs. Non-interest income increased $11.5 million or 9.8% in 2020 compared to 2019, driven by a $14.5 million or 176.6% increase in mortgage banking income due to a record volume of mortgage loans sold in 2020 at higher average gain on sale margins. Non-interest expense increased $42.6 million or 13.7%, reflecting the increase in costs from the larger asset base following the OLBK acquisition.

Total assets as of December 31, 2020 increased $0.7 billion or 4.5% compared to December 31, 2019, primarily due to PPP loans.  Portfolio loans of $10.8 billion increased 5.1% over the last twelve months, reflecting Wesbanco’s participation in the PPP program, which resulted in $726.3 million in remaining PPP loans in the loan portfolio at December 31, 2020.  As of December 31, 2020, both non-performing loans and non-performing assets as percentages of the loan portfolio and total assets were lower than at December 31, 2019, and have remained relatively consistent throughout 2020. Criticized and classified loan balances increased to 4.59% of total portfolio loans, as compared to 2.17% at December 31, 2019 due in part to the third and fourth quarter net downgrades of $209.9 million of hospitality loans as a result of reduced occupancy and debt service coverage from the current pandemic-driven environment.  As a result of a combination of the pandemic and the implementation of the CECL accounting standard, the provision for credit losses increased to $107.7 million for the year as compared to $11.2 million in 2019. Annualized net loan charge-offs to average loans for the full year period were six basis points compared to nine basis points in 2019.  Pandemic-related loan deferrals, under the CARES Act, have declined from $2.2 billion earlier in 2020 to $171.1 million, or 1.6% of total loans, as of December 31, with approximately $150 million of this total related to the hospitality industry.

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On August 4, 2020, Wesbanco completed a capital raise totaling $150.0 million of non-cumulative perpetual preferred stock evidenced in the form of depositary shares.  This stock pays quarterly dividends at an annual rate of 6.75% and becomes callable on November 15, 2025.  The capital raise essentially replaced the movement of Wesbanco’s trust preferred securities from Tier 1 to Tier 2 risk-based capital at the end of 2019, as required for banks with total assets greater than $15 billion, which occurred following the OLBK acquisition.  Wesbanco continues to maintain what we believe are strong regulatory capital ratios, which were enhanced by the capital raise, as both consolidated and bank-level regulatory capital ratios are well above the applicable “well-capitalized” standards promulgated by bank regulators and the BASEL III capital standards.  At December 31, 2020, Tier I leverage was 10.51%, Tier I risk-based capital was 14.72%, total risk-based capital was 17.58%, and the common equity Tier 1 capital ratio (“CET 1”) was 13.40%.  Tangible equity to tangible assets increased to 10.52% at period-end from 10.02% as of December 31, 2019, as the preferred stock issuance and increases in other comprehensive income and retained earnings benefitted this ratio.

Strong earnings and improved total capital enabled Wesbanco to increase the quarterly dividend rate 3.2% to $0.32 per share in the first quarter of 2020, the thirteenth increase over the last ten years, cumulatively representing a 129% increase over that period.

RESULTS OF OPERATIONS

EARNINGS SUMMARY

For the twelve months ending December 31, 2020, net income available to common shareholders was $119.4 million, or $1.77 per diluted share, compared to $158.9 million, or $2.83 per diluted share, for 2019. Net income available to common shareholders for the twelve months ended December 31, 2020 decreased 24.8% compared to 2019, while per share earnings decreased 37.5%.

For the twelve months ending December 31, 2020, net interest income increased $79.6 million, or 19.9%, due to an increase in earning assets from the OLBK acquisition. The net interest margin decreased 25 basis points to 3.37% due to the overall lower rate environment. Average loan balances increased 36.1% in 2020, mostly due to the OLBK acquisition and PPP loans as compared to 2019, as organic loan growth was mitigated from elevated levels of commercial real estate loans being refinanced in an aggressive secondary market. Total average deposits increased in 2020 by $2.8 billion or 31.5% compared to 2019, due to CARES Act stimulus deposits, PPP loans deposited in business accounts, increased personal savings and the OLBK acquisition. Certificates of deposit, which have the highest overall interest cost among deposits, increased by $371.9 million or 25.8% over the same time period due primarily to the OLBK acquisition.

For 2020, non-interest income increased $11.5 million or 9.8% compared to 2019.  Mortgage banking income increased $14.5 million or 176.6% from 2019 to 2020 due to a record number of mortgage loan originations and mortgage loans sold to the secondary market during 2020.  Other non-interest income increased by $7.4 million or 51.4% from 2019 to 2020 due primarily to a $2.7 million increase in business loan swap fee income.  Somewhat offsetting these increases, service charges on deposits decreased $5.0 million or 18.7%, due to stimulus deposits and lower consumer spending resulting in fewer eligible fees.  Electronic banking fees decreased $5.1 million or 22.6% due to the ongoing limitation on interchange fees resulting from the Durbin amendment to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which became effective for Wesbanco on July 1, 2019.  The limitation only applies to banks with greater than $10 billion in total assets.

The following comments on non-interest expense exclude restructuring and merger-related expenses in both years. Non-interest expense in 2020 increased $49.3 million or 16.7% compared to 2019. With net revenue growth of 17.6% in 2020, the efficiency ratio decreased in 2020 to 56.4% from 56.7% in 2019. Salaries and wages increased $20.7 million or 15.6% compared to 2019, due to increased compensation expense from an increase in average full-time equivalent employees related to the OLBK acquisition. Employee benefits expense increased $2.4 million or 6.1% compared to 2019, specifically due to the increase in employees and a $1.1 million increase in health care costs. Net occupancy increased $5.1 million in 2020 or 22.6% compared to 2019, principally due to increased building-related costs including utilities, lease expense, depreciation, repairs and other seasonal maintenance costs, mostly from the acquired OLBK branches, as well as normal building maintenance and repair costs of the legacy branch network and other infrastructure needs.  FDIC insurance expense increased $5.8 million or 295.4% in 2020 as compared to 2019 due to a higher assessment rate for banks above $10 billion in assets, resulting from certain risk factors and the larger asset level following the OLBK acquisition, as well as the recording of a $3.1 million assessment credit in the second half of 2019.

The provision for federal and state income taxes decreased to $23.0 million in 2020 compared to $34.3 million in 2019, due to lower pretax income in 2020. The effective tax rate was 15.9% and 17.8% for the years ended December 31, 2020 and 2019, respectively. Wesbanco recognized $2.0 million and $1.6 million in New Markets Tax Credits for the years ended December 31, 2020 and 2019, respectively.

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TABLE 1. NET INTEREST INCOME

	For the years ended December 31,
(dollars in thousands)	2020			2019			2018
Net interest income	$	479,480		$	399,904		$	347,236
Taxable-equivalent adjustments to net interest income		4,519			5,318			5,524
Net interest income, fully taxable-equivalent	$	483,999		$	405,222		$	352,760
Net interest spread, non-taxable-equivalent		3.14	%		3.27	%		3.21	%
Benefit of net non-interest bearing liabilities		0.20	%		0.30	%		0.25	%
Net interest margin		3.34	%		3.57	%		3.46	%
Taxable-equivalent adjustment		0.03	%		0.05	%		0.06	%
Net interest margin, fully taxable-equivalent		3.37	%		3.62	%		3.52	%

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. Net interest income increased $79.6 million or 19.9% in 2020 compared to 2019, due to a 28.3% increase in average earning asset balances, primarily driven by the late 2019 acquisition of OLBK and related net asset accretion from purchase accounting. Average loan balances increased by 36.1% in 2020 compared to 2019, mostly due to the OLBK acquisition and partially due to $853.1 million in PPP loans mostly originated in the second quarter of 2020, as non-PPP organic loan growth was reduced due to lower loan demand during the pandemic, other than residential lending, a majority of which was sold into the secondary market.  PPP loans contributed a total of $19.2 million in interest and fee accretion income in 2020. Total average deposits increased in 2020 by $2.8 billion or 31.5% compared to 2019, due to the deposits acquired from OLBK and from an influx of deposits from the stimulus packages associated with the CARES Act, PPP loan proceeds deposited into customer accounts and lower general consumer spending.  Certificates of deposit, which have the highest overall interest cost among deposits, increased by only $371.9 million or 25.8% over the same time period due to runoff in higher cost certificates of deposit from prior acquisitions, including OLBK. The net interest margin decreased 25 basis points in 2020 to 3.37% from 3.62% in 2019. The margin’s decline was due to multiple decreases during late 2019 and the first quarter of 2020 in the Federal Reserve’s target federal funds rate, a relatively flat yield curve and additional balance sheet liquidity over the year.  Purchase accounting accretion from prior acquisitions benefitted both the 2020 and 2019 net interest margin by 19 basis points.  The cost of interest bearing liabilities decreased by 42 basis points from 2019 to 2020. The decrease in the cost is primarily due to management actions to reduce certain interest bearing demand deposits, which include public funds, and lower rates for certificates of deposit, customer repurchase agreements, short to medium-term Federal Home Loan Bank borrowings and subordinated and junior subordinated debt.

Interest income increased $57.0 million or 11.8% in 2020 compared to 2019 due to higher overall earning assets, particularly from the OLBK acquisition and PPP loan originations, and was partially offset by lower yields in every earning asset category. Earning asset yields were influenced negatively in 2020 compared to 2019 due to multiple federal funds rate decreases totaling 225 basis points occurring throughout the second half of 2019 and the first quarter of 2020.  Average loan balances increased by $2.9 billion in 2020 compared to 2019, due primarily to the acquisition of OLBK and PPP loan originations.  Loan yields decreased by 64 basis points during this same period to 4.28% from the previously mentioned federal funds rate decreases and originations of PPP 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 2020, average loans represented 75.6% of average earning assets, an increase from 71.3% in 2019. Average taxable securities balances decreased by $84.7 million or 3.6% from 2019, due to higher levels of calls and mortgage security-related paydowns in the lower rate environment.  In addition, approximately $218 million of mortgage-backed securities were sold at the end of the first quarter of 2020 to take advantage of market opportunities and to boost liquidity for COVID-19 related reasons.  Taxable securities yields decreased by 42 basis points and tax-exempt securities yields decreased by two basis points in 2020 as compared to 2019.  The flat yield curve and lower overall rate environment that persisted through most of 2020 has resulted in the yield decrease for all securities as calls, repayments and maturities of legacy higher-rate securities have been replaced with purchases at lower overall market yields.  Increased prepayments on mortgage-backed securities in the lower rate environment also acts to reduce the taxable securities yields due to an increased rate of amortization of certain premium securities.  The average balance of tax-exempt securities, which have the highest yields within securities, decreased to 21.3% of total securities in 2020, compared to 23.4% in 2019, primarily due to increased calls on tax-exempt securities in the second half of the year as market rates began to decrease.

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Total portfolio loans increased $521.2 million or 5.1% over the last twelve months, while total commercial loans increased $743.1 million or 10.1%. Loan growth was achieved through $4.6 billion in total loan originations, led by $2.8 billion in business loan originations for the past twelve months. Loan growth was driven by PPP loans, expanded market areas and additional commercial personnel in our core markets, but was partially offset by significant loan paydowns or payoffs as some loans were refinanced in the secondary lending market or with other banks by customers who desired better terms and longer maturities for their commercial real estate mortgages, and some financed projects were sold by their developers.

Commercial loans with floors currently average 4.22% on approximately $2.3 billion or 29% of total commercial loans at December 31, 2020, as compared to $2.4 billion averaging 4.50% or 33% of commercial loans at December 31, 2019.  Approximately 69% or $1.6 billion of these loans are currently priced at their floor, as compared to 49% or $1.2 billion at December 31, 2019. These loans typically do not adjust as rapidly from their current floor level as compared to loans without floors, due to the amount of the rate change as compared to the floor rate or next repricing date. In addition, in a declining rate environment, some customers may request rates below existing contractual floors, which we may grant for competitive or other reasons.

Interest expense decreased $22.6 million or 26.7% in 2020 compared to 2019, due primarily to decreases in the cost of all interest bearing liability categories, as market rates dropped in reaction to COVID-19 and management reduced certain deposit rates, as well as higher time deposit purchase accounting accretion. The cost of interest bearing liabilities decreased by 42 basis points from 1.05% in 2019 to 0.63% in 2020. Average interest bearing deposits increased by $1.6 billion or 24.9% from 2019, due to the OLBK acquisition and increases in organic deposits heavily driven by CARES Act stimulus deposits.  The rate on interest bearing deposits decreased by 34 basis points from 2019 to 33 basis points in 2020, primarily from aggressive decreases in rates on interest bearing public funds and certificates of deposit in response to the COVID-19 pandemic. Average non-interest bearing demand deposits increased from 2019 to 2020 by $1.2 billion or 48.2% and were 31.9% of total average deposits at December 31, 2020, compared to 28.3% at December 31, 2019, reflecting the acquired OLBK non-interest bearing demand deposits, CARES Act stimulus deposits, PPP loan deposits, higher personal savings and ongoing checking account marketing strategies. The average balance of FHLB borrowings increased by $61.2 million from 2019 to 2020, but their average rate paid decreased by 30 basis points to 2.17% over this same time period due to lower interest rates.  In the second half of 2020, Wesbanco paid off approximately $580.0 million in maturing borrowings that had higher average rates with available liquidity. Average other borrowings, subordinated debt and junior subordinated debt balances increased by $62.2 million or 12.7% from 2019 to 2020, due primarily to the OLBK acquisition, and their average rates paid decreased by 122 and 94 basis points, respectively, over this same time period due to decreases in LIBOR, the index upon which most of this variable-rate type of borrowing is priced, other than fixed rates on $35.1 million of subordinated debt.

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TABLE 2. AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN ANALYSIS

	For the years ended December 31,
	2020							2019							2018
(dollars in thousands)	Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate			Average Balance		Interest		Average Rate
ASSETS
Due from banks-interest bearing	$	548,078	$	1,175		0.21	%	$	71,312	$	1,720		2.41	%	$	80,535	$	1,801		2.24	%
Loans, net of unearned income (1)		10,874,763		465,677		4.28	%		7,991,107		393,166		4.92	%		7,013,877		331,961		4.73	%
Securities: (2)
Taxable		2,281,905		53,594		2.35	%		2,366,631		65,648		2.77	%		2,109,191		56,898		2.70	%
Tax-exempt (3)		616,808		21,518		3.49	%		722,388		25,324		3.51	%		768,304		26,301		3.42	%
Total securities		2,898,713		75,112		2.59	%		3,089,019		90,972		2.95	%		2,877,495		83,199		2.89	%
Other earning assets		60,054		3,832		6.38	%		53,919		3,713		6.89	%		55,302		3,519		6.37	%
Total earning assets (3)		14,381,608		545,796		3.80	%		11,205,357		489,571		4.37	%		10,027,209		420,480		4.19	%
Other assets		2,061,096							1,648,563							1,310,170
Total Assets	$	16,442,704						$	12,853,920						$	11,337,379
LIABILITIES AND    SHAREHOLDERS’ EQUITY
Interest bearing demand deposits	$	2,572,248	$	7,069		0.27	%	$	2,155,211	$	16,805		0.78	%	$	1,929,876	$	13,144		0.68	%
Money market accounts		1,611,135		4,616		0.29	%		1,165,346		8,024		0.69	%		1,049,059		5,016		0.48	%
Savings deposits		2,084,576		1,802		0.09	%		1,705,858		2,995		0.18	%		1,454,525		1,225		0.08	%
Certificates of deposit		1,814,693		13,562		0.75	%		1,442,745		15,631		1.08	%		1,396,446		12,450		0.89	%
Total interest bearing    deposits		8,082,652		27,049		0.33	%		6,469,160		43,455		0.67	%		5,829,906		31,835		0.55	%
Federal Home Loan Bank    borrowings		1,135,934		24,701		2.17	%		1,074,715		26,548		2.47	%		1,121,108		23,333		2.08	%
Other borrowings		357,100		1,729		0.48	%		317,585		5,401		1.70	%		260,388		3,717		1.43	%
Subordinated debt and junior    subordinated debt		193,693		8,318		4.29	%		170,983		8,945		5.23	%		176,866		8,836		5.00	%
Total interest bearing    liabilities		9,769,379		61,797		0.63	%		8,032,443		84,349		1.05	%		7,388,268		67,721		0.92	%
Non-interest bearing demand    deposits		3,781,583							2,550,864							2,177,142
Other liabilities		240,340							150,618							123,544
Shareholders’ equity		2,651,402							2,119,995							1,648,425
Total Liabilities and Shareholders’    Equity	$	16,442,704						$	12,853,920						$	11,337,379
Taxable equivalent net interest spread						3.17	%						3.32	%						3.27	%
Taxable equivalent net interest    margin (3)			$	483,999		3.37	%			$	405,222		3.62	%			$	352,759		3.52	%

(1) Gross of allowance for credit losses and net of unearned income. Includes non-accrual and loans held for sale. Loan fees included in interest income on loans were $16.2 million, $1.8 million and $3.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.  As part of loan fees for the year ended December 31, 2020, PPP loan fees were $13.4 million. Additionally, loan accretion included in interest income on loans acquired from prior acquisitions was $17.0 million, $17.9 million and $11.7 million for the years ended December 31, 2020, 2019 and 2018, respectively, while accretion on interest bearing liabilities acquired from prior acquisitions was $9.5 million, $2.8 million and $2.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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

(3) Taxable equivalent basis is calculated on tax-exempt securities using a rate of 21% for all periods presented.

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TABLE 3. RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE (1)

	2020 Compared to 2019
(in thousands)	Volume			Rate			Net Increase (Decrease)
Increase (decrease) in interest income:
Due from banks—interest bearing	$	2,279		$	(2,824	)	$	(545	)
Loans, net of unearned income		129,207			(56,696	)		72,511
Taxable securities		(2,282	)		(9,772	)		(12,054	)
Tax-exempt securities (2)		(3,684	)		(123	)		(3,807	)
Other earning assets		404			(285	)		119
Total interest income change (2)		125,924			(69,700	)		56,224
Increase (decrease) in interest expense:
Interest bearing demand deposits		2,767			(12,503	)		(9,736	)
Money market		2,360			(5,768	)		(3,408	)
Savings deposits		562			(1,755	)		(1,193	)
Certificates of deposit		3,462			(5,531	)		(2,069	)
Federal Home Loan Bank borrowings		1,454			(3,301	)		(1,847	)
Other borrowings		601			(4,273	)		(3,672	)
Subordinated debt and junior subordinated debt		1,097			(1,724	)		(627	)
Total interest expense change		12,303			(34,855	)		(22,552	)
Net interest income increase (decrease) (2)	$	113,621		$	(34,845	)	$	78,776

(1) Changes to rate/volume are allocated to both rate and volume on a proportionate dollar basis.

(2) The yield on earning assets and the net interest margin are presented on a fully taxable-equivalent (FTE) and annualized basis. The FTE basis adjusts for the tax benefit of income on certain tax-exempt loans and investments using the federal statutory tax rate of 21% for 2020 and 2019. Wesbanco believes this measure to be the preferred industry measurement of net interest income and provides relevant comparison between taxable and non-taxable amounts.

PROVISION FOR CREDIT LOSSES - LOANS

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.  The provision for credit losses - loans and loan commitments increased to $107.7 million in 2020 compared to $11.2 million in 2019 due to the adoption of CECL on January 1, 2020, and as a result of changes in the macroeconomic forecast resulting in expected significantly higher unemployment over the reasonable and supportable forecast period of one year, primarily increasing the allowance for loan losses and allowance for loan commitments.  Non-performing loans were 0.38% of total loans as of December 31, 2020, decreasing from 0.49% of total loans at the end of 2019. Non-performing assets were 0.38% of total loans and other real estate and repossessed assets as of December 31, 2020, decreasing from 0.53% at the end of the fourth quarter of 2019.  Criticized and classified loans were 4.59% of total loans, increasing from 2.17% as of December 31, 2019, primarily due to recent adjustments to the internal loan classification system, which impacted risk grades, and downgrades in the Company’s hospitality loan portfolio. Past due loans at December 31, 2020 were 0.37% of total loans, compared to 0.46% at December 31, 2019. The provision for credit losses was higher than net charge-offs by $100.6 million and $3.6 million in 2020 and 2019, respectively.  (Please see the Credit Quality and Allowance for Credit Losses – Loans and Loan Commitments section of this MD&A for additional discussion).

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TABLE 4. NON-INTEREST INCOME

	For the years ended December 31,
(dollars in thousands)	2020		2019		$ Change			% Change
Trust fees	$	26,335	$	26,579	$	(244	)		(0.9	)%
Service charges on deposits		21,943		26,974		(5,031	)		(18.7	)
Electronic banking fees		17,524		22,634		(5,110	)		(22.6	)
Net securities brokerage revenue		6,189		6,990		(801	)		(11.5	)
Bank-owned life insurance		7,359		5,913		1,446			24.5
Mortgage banking income		22,736		8,219		14,517			176.6
Net securities gains		4,268		4,320		(52	)		(1.2	)
Net gain on other real estate owned and other assets		103		732		(629	)		(85.9	)
Net insurance services revenue		3,887		3,475		412			11.9
Debit card sponsorship income		2,792		328		2,464			751.2
Payment processing fees		3,010		3,002		8			0.3
Swap fee and valuation income		6,110		3,406		2,704			79.4
Other		5,929		4,144		1,785			43.1
Total non-interest income	$	128,185	$	116,716	$	11,469			9.8	%

Non-interest income, a significant source of revenue and an important part of Wesbanco’s results of operations, was 21.1% and 22.6% of net revenues for 2020 and 2019, respectively. Wesbanco offers its customers a wide range of retail, commercial, investment and electronic 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. Non-interest income increased $11.5 million or 9.8% in 2020 compared to 2019, due specifically to record income levels recorded in mortgage banking income and swap fee and valuation income.  The increases were somewhat offset by the Durbin amendment and its impact on electronic banking fees as well as the COVID-19 impact on several revenue streams.

Trust fees decreased $0.2 million in 2020 as compared to 2019 due to a lower average market value of trust assets in the first half of 2020 as compared to 2019; however, fee decreases were mitigated following substantial market improvements in the second half of 2020. As of December 31, 2020, total trust assets of $5.0 billion increased 6.4% from $4.7 billion at December 31, 2019. As of December 31, 2020, trust assets include managed assets of $4.1 billion and non-managed (custodial) assets of $0.9 billion. Assets managed for the WesMark Funds, a proprietary group of mutual funds for which Wesbanco Investment Department serves as investment advisor, were $1.0 billion as of December 31, 2020 and $0.9 billion as of December 31, 2019, and are included in trust managed assets.

Service charges on deposits decreased $5.0 million or 18.7% compared to the prior year due to higher consumer deposit balances throughout most of 2020 associated with CARES Act stimulus payments and lower general consumer spending during pandemic-related lockdowns, resulting in fewer eligible fee-generating transactions.

Electronic banking fees, which include debit card interchange fees, decreased by $5.1 million or 22.6% compared to 2019, specifically due to 2020 being the first full year of the ongoing limitation on interchange fees resulting from the Durbin amendment to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which became effective for Wesbanco on July 1, 2019.  The limitation only applies to banks with greater than $10 billion in total assets. Lower consumer spending, particularly during the spring government-required lockdowns, prevented normal spending patterns and transaction counts temporarily reducing fees. Slightly offsetting the effect of the Durbin amendment was a higher volume of transactions resulting from the OLBK acquisition and increased transactions in the back part of the year from internet and mobile sources.

Bank-owned life insurance increased $1.4 million or 24.5% compared to 2019 due to higher mortality-related benefits received in 2020 as well as an increase in the average cash surrender value balance during 2020, due to the bank-owned life insurance acquired in the OLBK acquisition.

Mortgage banking income increased $14.5 million or 176.6% compared to 2019 due to a record volume of mortgage production, particularly from refinance activity, and loans sold into the secondary market resulting from the low interest rate environment in 2020.  Total mortgage production was $1.3 billion in 2020, an increase of 102.7% from $653.2 million in 2019.  For the year ended December 31, 2020, $679.7 million of mortgages were sold into the secondary market at a net margin of 3.3% as compared to $287.4 million sold at a net margin of 2.9% in the comparable 2019 period.  Included in mortgage banking income and the calculation of net margin noted above are losses of $5.2 million and $1.4 million from the fair value adjustments on loans held for sale, loan commitments and related derivatives for the years ended December 31, 2020 and 2019, respectively.

Debit card sponsorship income is a new revenue stream for Wesbanco that was acquired in the OLBK acquisition on November 22, 2019.  The fees are earned from Wesbanco’s sponsorship of certain customers into various debit networks and are generated from the total

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transactions processed on the debit networks.  Debit sponsorship income was $2.8 million for the year ended December 31, 2020.  The 2019 debit card sponsorship income of $0.3 million included only slightly more than one month of activity from OLBK’s acquisition date.  Wesbanco currently plans to reduce this program’s customer-related revenues over the next year for risk-related reasons, either from a sale of the business or winding down of activity.

Swap fee and valuation income increased $2.7 million or 79.4% compared to 2019 due to a record volume of new loan swaps executed during the year, somewhat offset by negative fair value adjustments on existing swaps.  For the year ended December 31, 2020, new swaps executed during the year totaled $331.0 million resulting in $8.1 million of fee income, compared to new swaps executed of $193.7 million resulting in $4.5 million of fee income for the year ended December 31, 2019.  Fair value adjustments for the years ended December 31, 2020 and 2019 were ($2.0) million and ($1.1) million, respectively.  

TABLE 5. NON-INTEREST EXPENSE

	For the years ended December 31,
(dollars in thousands)	2020			2019		$ Change			% Change
Salaries and wages	$	153,166		$	132,485	$	20,681			15.6	%
Employee benefits		41,723			39,313		2,410			6.1
Net occupancy		27,580			22,505		5,075			22.6
Equipment		24,801			20,494		4,307			21.0
Marketing		5,957			6,062		(105	)		(1.7	)
FDIC insurance		7,734			1,956		5,778			295.4
Amortization of intangible assets		13,411			10,340		3,071			29.7
Restructuring and merger-related expenses		9,725			16,397		(6,672	)		(40.7	)
Franchise and other miscellaneous taxes		14,112			12,813		1,299			10.1
Consulting, regulatory and advisory fees		11,717			8,993		2,724			30.3
ATM and electronic banking interchange expenses		8,365			6,931		1,434			20.7
Postage and courier expenses		5,028			5,334		(306	)		(5.7	)
Supplies		4,561			4,499		62			1.4
Legal fees		3,307			3,054		253			8.3
Communications		4,292			3,720		572			15.4
Other real estate owned and foreclosure expenses		(108	)		397		(505	)		(127.2	)
Other		19,474			16,915		2,559			15.1
Total non-interest expense	$	354,845		$	312,208	$	42,637			13.7	%

Non-interest expense in 2020 increased $42.6 million or 13.7% compared to 2019, principally from the OLBK acquisition, which increased assets by $3.0 billion, excluding goodwill, and added 37 offices to our branch network. In 2020, there were $9.7 million of merger-related expenses related to the OLBK acquisition and branch optimization restructuring charges compared to $16.4 million in merger-related expenses in 2019 for the OLBK and FFKT acquisitions. Non-interest expense, excluding merger-related expenses, increased $49.3 million or 16.7% in 2020 compared to 2019.

Salaries and wages increased $20.7 million or 15.6% compared to 2019, due to increased compensation expense related to a 10.2% increase in average full-time equivalent employees (“FTEs”) related to the OLBK acquisition and from annual merit increases in mid-2020. Employee benefits expense increased $2.4 million or 6.1% compared to 2019, specifically due to an increase in FTEs and related payroll taxes along with a $1.1 million increase in health care costs, and was partly offset by a decrease of $2.4 million in pension expense. Market adjustments of the underlying investments of the deferred compensation plan, for which a corresponding entry was recorded in net securities gains (losses) also increased by $0.2 in 2020 from 2019.

Net occupancy increased $5.1 million in 2020 or 22.6% compared to 2019, principally due to increased building-related costs including utilities, lease expense, depreciation, repairs and other seasonal maintenance costs, mostly from the acquired retail branches, as well as normal increases in building maintenance and repair costs of the legacy branch network and other infrastructure needs.

Equipment costs increased $4.3 million or 21.0% compared to 2019 due to the OLBK acquisition and continuous improvements in technology and communication infrastructure, software costs, as well as loan and deposit origination and customer support platforms.  Specifically, service agreements expense increased $2.3 million or 20.8% from 2019 to 2020.

FDIC insurance increased $5.8 million or 295.4% compared to 2019, due to both a larger assessment base from the OLBK acquisition and also due to a $3.4 million assessment credit that was utilized to reduce expense in 2019.  During September 2019, the banking industry was notified by the FDIC that its deposit insurance fund (“DIF”) reached the required minimum reserve ratio of 1.38%, permitting the FDIC to

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offset current bank assessments with prior credits from 2016 through 2018 earned by banks with less than $10 billion in assets during that time period.  Wesbanco recorded its total DIF credit of $3.4 million in the second half of 2019, of which $0.3 million was related to OLBK.

Amortization of intangible assets increased $3.1 million or 29.7% in 2020 compared to 2019. The OLBK acquisition added approximately $32.9 million in core deposit intangibles.

Restructuring and merger-related expenses in 2020 were comprised of $6.4 million in final merger-related expenses related to the OLBK acquisition and $3.3 million in restructuring expenses related to the branch optimization strategy announced by Wesbanco in the third quarter. The 2020 OLBK merger-related expenses included $2.7 million in change-in-control payments, $1.7 million from contract termination and non-refundable conversion costs, $1.3 million in employee severance costs and retention bonuses, and $0.7 million in miscellaneous accounting, valuation and other charges. The branch optimization restructuring expenses were predominantly net write-downs to appraised value on owned and leased properties that were closed in January 2021.

Consulting, regulatory, accounting and advisory fees increased $2.7 million or 30.3% in 2020 compared to 2019. The increase was due to higher swap clearing expense from a higher volume of cleared swaps in 2020 as compared to 2019, increased underwriting and processing fees from the record volume of mortgage originations in 2020 and higher consulting fees incurred in 2020.

INCOME TAXES

The provision for federal and state income taxes decreased to $23.0 million in 2020 compared to $34.3 million in 2019. The effective tax rate was 15.9% and 17.8% for the years ended December 31, 2020 and 2019, respectively. The decrease in the provision is specifically due to the 24.9% decrease in pretax income from 2019 to 2020.  Also affecting the provision were reductions from approximately $1.0 million in filed return and other miscellaneous adjustments in 2020. The effective tax rate decreased for the same reason as mentioned above and also due to the utilization of additional New Markets Tax Credits by Wesbanco in 2020. For more information on such credits, see Note 20, “Wesbanco Bank Community Development Corporation”.

FINANCIAL CONDITION

Total assets, deposits, and shareholders’ equity increased 4.5%, 13.0%, and 6.3%, respectively, compared to December 31, 2019. Total securities decreased $535.6 million or 16.4% from December 31, 2019 to December 31, 2020, primarily driven by the sale of mortgage-backed securities, collateralized mortgage obligations and select municipal securities, at a net gain of $2.7 million, to provide for additional liquidity related to potential COVID-19 requirements. The securities’ decrease was partially offset by a $37.3 million increase in net unrealized gains in the available-for-sale portfolio. Total portfolio loans increased $521.2 million or 5.1% as participation in the SBA PPP loan program provided approximately $726.3 million in loans remaining at December 31, 2020. Deposits increased $1.4 billion from year-end 2019 resulting from increases of 25.8%, 14.5%, and 11.0% in demand deposits, savings deposits, and money market deposits, respectively, which were partially offset by a 21.3% decrease in certificates of deposit. The growth in transaction-based accounts is primarily attributable to CARES Act stimulus funds received, increased personal savings and reduced consumer spending, focused retail and business strategies to obtain more account relationships and customers’ preferences for shorter-term maturities. The transaction-based accounts also increased from business customers obtaining loans from the PPP loan program.

Deposit balances were also somewhat 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. The decrease in certificates of deposit is a result of lower overall rates and management periodically offering lower than median competitive rates for maturing certificates of deposit and customer preferences for other deposit types, coupled with a $30.7 million decrease in CDARS® balances. The decline was also impacted by customer run-off of higher cost certificates of deposit from the OLBK and other prior acquisitions. Total borrowings decreased 48.2% or $914.6 million during 2020, as additional liquidity permitted the paydown of maturing FHLB advances, net of new borrowings, by $866.6 million, coupled with $6.7 million of junior subordinated debentures, acquired from OLBK, which were redeemed during 2020 and a $40.4 million decrease in other short-term borrowings.

Total shareholders’ equity increased $162.8 million or 6.3%, compared to December 31, 2019, primarily due to $144.5 in net proceeds from the issuance of 6.0 million in depositary shares, each representing 1/40th interest in a share of Wesbanco’s 6.75% fixed rate reset non-cumulative perpetual series A preferred stock. Additionally, net income exceeded dividends for the year by $36.2 million and comprehensive income increased $30.2 million. Such factors were partially offset by decreases in retained earnings from the adoption of the new CECL accounting standard totaling $26.6 million and share repurchase activity of $25.4 million before suspending the program in mid-March due to the onset of the pandemic.

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SECURITIES

TABLE 6. COMPOSITION OF SECURITIES (1)

	December 31,						2020-2019						December 31,
(dollars in thousands)	2020			2019			$ Change			% Change			2018
Equity securities (at fair value)	$	13,047		$	12,343		$	704			5.7		$	11,737
Available-for-sale debt securities (at fair value)
U.S. Treasury		39,982			32,836			7,146			21.8			19,878
U.S. Government sponsored entities and agencies		211,682			159,628			52,054			32.6			141,652
Residential mortgage-backed securities and    collateralized mortgage obligations of government    sponsored entities and agencies		1,264,737			1,815,987			(551,250	)		(30.4	)		1,561,255
Commercial mortgage-backed securities and    collateralized mortgage obligations of government    sponsored entities and agencies		320,098			190,409			129,689			68.1			168,972
Obligations of states and political subdivisions		115,762			145,609			(29,847	)		(20.5	)		185,114
Corporate debt securities		25,875			49,089			(23,214	)		(47.3	)		37,258
Total available-for-sale debt securities	$	1,978,136		$	2,393,558		$	(415,422	)		(17.4	)	$	2,114,129
Held-to-maturity debt securities (at amortized cost)
U.S. Government sponsored entities and agencies	$	7,779		$	9,216		$	(1,437	)		(15.6	)	$	10,823
Residential mortgage-backed securities and    collateralized mortgage obligations of government    sponsored entities and agencies		89,151			122,937			(33,786	)		(27.5	)		148,300
Obligations of states and political subdivisions		601,128			686,376			(85,248	)		(12.4	)		828,520
Corporate debt securities		33,154			33,224			(70	)		(0.2	)		33,291
Total held-to-maturity debt securities (2)	$	731,212		$	851,753		$	(120,541	)		(14.2	)	$	1,020,934
Total securities	$	2,722,395		$	3,257,654		$	(535,259	)		(16.4	)	$	3,146,800
Available-for-sale and equity securities:
Weighted average yield at the respective year-end (3)		2.09	%		2.67	%								2.78	%
As a % of total securities		73.1	%		73.9	%								67.6	%
Weighted average life (in years)		3.4			4.1									5.0
Held-to-maturity securities:
Weighted average yield at the respective year-end (3)		3.35	%		3.51	%								3.47	%
As a % of total securities		26.9	%		26.1	%								32.4	%
Weighted average life (in years)		3.8			3.8									4.6
Total securities:
Weighted average yield at the respective year-end (3)		2.43	%		2.89	%								3.00	%
As a % of total securities		100.0	%		100.0	%								100.0	%
Weighted average life (in years)		3.5			4.0									4.8

(1) At December 31, 2020, 2019 and 2018, there were no holdings of any one issuer, other than the U.S. government and certain federal or federally-related agencies, in an amount greater than 10% of Wesbanco’s shareholders’ equity.

(2) Total held-to-maturity debt securities are presented on the balance sheet net of their allowance for credit losses totaling $0.3 million at December 31, 2020.

(3) Weighted average yields have been calculated on a taxable-equivalent basis using the federal statutory tax rate of 21% in 2020, 2019 and 2018.  

Total investment securities, which are a source of liquidity for Wesbanco as well as a contributor to interest income, decreased by $535.3 million or 16.4% from December 31, 2019 to December 31, 2020. Throughout the year, the available-for-sale portfolio decreased by $415.4 million or 17.4% primarily due to the sale of residential mortgage-backed securities at the end of the first quarter to take advantage of market opportunities and to free cash for COVID-19 related needs, such as larger commercial or home equity line withdrawals, while the held-to-maturity portfolio decreased by $120.5 million or 14.2% due to calls of municipal securities in the current lower rate environment.  The weighted average yield of the portfolio decreased 46 basis points from 2.89% at December 31, 2019 to 2.43% at December 31, 2020, primarily due to increased prepayment speeds on mortgage-backed securities, calls of legacy higher-rate agency and municipal securities as market rates declined in the first half and stayed low throughout 2020, and purchases at the lower market rates throughout the year.

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Total gross unrealized securities losses decreased $5.6 million, from $7.4 million at December 31, 2019 to $1.8 million at December 31, 2020.  The decrease in unrealized losses from December 31, 2019, was due to decreases in market rates during 2020 causing market prices to increase on most securities purchased or acquired in prior years. Wesbanco believes that none of the unrealized losses on available-for-sale debt securities at December 31, 2020 requires 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 gains on available-for-sale securities included in accumulated other comprehensive income, net of tax, as of December 31, 2020 and December 31, 2019 were $46.9 million and $20.7 million, respectively. These net unrealized pre-tax gains 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 gains in the held-to-maturity portfolio, which are not accounted for in other comprehensive income, were $37.0 million at December 31, 2020, compared to $22.8 million at December 31, 2019.  With approximately 27% of the investment portfolio in the held-to-maturity category, compared to 26% one year ago, 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 consist 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.

On January 1, 2020, Wesbanco adopted the CECL accounting standard. Upon adoption, the Company recognized $0.2 million to opening retained earnings, which represents the CECL allowance for held-to-maturity securities as of January 1, 2020. The corporate and municipal bonds in Wesbanco’s held-to-maturity securities portfolio are analyzed quarterly to determine if any change in the 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 income statement in the provision for credit losses. Accrued interest receivable on held-to-maturity securities, which was $5.3 million as of December 31, 2020, 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 macro-economic or governmental policies that could affect this assumption.

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TABLE 7. MATURITY DISTRIBUTION AND YIELD ANALYSIS OF SECURITIES

The following table presents the amortized cost and tax-equivalent yields of available-for-sale and held-to-maturity debt securities by contractual maturity at December 31, 2020. In some instances, the issuers may have the right to call or prepay obligations without penalty prior to the contractual maturity date.

	One Year or less					One to Five Years					Five to Ten Years					Over Ten Years					Mortgage- backed securities					Total
(dollars in thousands)	Amount		Yield (1)			Amount		Yield (1)			Amount		Yield (1)			Amount		Yield (1)			Amount		Yield (1)			Amount		Yield (1)
Available-for-sale
U.S. Treasuries	$	39,975		0.12	%	$	—		—		$	—		—		$	—		—		$	—		—		$	39,975		0.12	%
U.S. Government sponsored entities    and agencies		12,000		0.36	%		3,492		2.17	%		63,420		1.51	%		45,641		2.02	%		79,556		2.97	%		204,109		2.14	%
Residential mortgage-backed    securities and collateralized    mortgage obligations of    government sponsored entities    and agencies (2)		—		—			—		—			—		—			—		—			1,230,106		2.04	%		1,230,106		2.04	%
Commercial mortgage-backed    securities and collateralized    mortgage obligations of    government sponsored entities    and agencies (2)		—		—			—		—			—		—			—		—			308,903		1.85	%		308,903		1.85	%
Obligations of states and political    subdivisions (3)		3,672		3.12	%		35,699		4.17	%		52,027		3.50	%		17,204		3.64	%		—		—			108,602		3.73	%
Corporate debt securities		12,533		2.44	%		7,501		1.27	%		4,929		3.61	%		—		—			—		—			24,963		2.32	%
Total available-for-sale    securities	$	68,180		0.75	%	$	46,692		3.56	%	$	120,376		2.46	%	$	62,845		2.46	%	$	1,618,565		2.05	%	$	1,916,658		2.09	%
Held-to-maturity
U.S. Government sponsored entities    and agencies	$	—		—		$	—		—		$	—		—		$	—		—		$	7,779		2.14	%	$	7,779		2.14	%
Residential mortgage-backed    securities and collateralized    mortgage obligations of    government sponsored entities    and agencies (2)		—		—			—		—			—		—			—		—			89,151		2.20	%		89,151		2.20	%
Obligations of states and political    subdivisions (3)		9,630		3.35	%		107,280		4.04	%		217,953		3.56	%		266,265		3.26	%		—		—			601,128		3.51	%
Corporate debt securities		—		—			10,666		2.71	%		22,488		3.61	%		—		—			—		—			33,154		3.32	%
Total held-to-maturity securities	$	9,630		3.35	%	$	117,946		3.92	%	$	240,441		3.56	%	$	266,265		3.26	%	$	96,930		2.20	%		731,212		3.35	%
Total (4)	$	77,810		1.07	%	$	164,638		3.81	%	$	360,817		3.19	%	$	329,110		3.11	%	$	1,715,495		2.06	%	$	2,647,870		2.43	%

(1) Yields are determined based on the lower of the yield-to-call or yield-to-maturity.

(2) Mortgage-backed and collateralized mortgage securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their prepayment speeds. Projected maturities based on current speeds within one year, between one and five years, between five and ten years and over ten years are expected to be approximately $78.6 million, $1.3 billion, $318.9 million and $28.6 million, respectively.

(3) Average yields on obligations of states and political subdivisions have been calculated on a taxable-equivalent basis using the federal statutory tax rate of 21%.

(4) This table does not include equity securities, of which $10.1 million consists of investments in various mutual funds held in grantor trusts formed in connection with a deferred compensation plan, which are recorded at fair value and totaled $13.0 million at December 31, 2020.

Cost-method investments consist primarily of FHLB of Pittsburgh, Cincinnati and Indianapolis stock totaling $34.0 million and $66.8 million at December 31, 2020 and 2019, respectively, and are included in Other Assets in the Consolidated Balance Sheets.

Wesbanco’s municipal portfolio comprises 26.5% of the overall securities portfolio as of December 31, 2020 compared to 25.5% as of December 31, 2019, which carries different risks that are not as prevalent in other security types contained in the portfolio. The following table presents the allocation of the individual bonds in the municipal bond portfolio based on the combined ratings of two major bond credit rating agencies (at fair value):

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TABLE 8. MUNICIPAL BOND RATINGS

	December 31, 2020				December 31, 2019
(dollars in thousands)	Amount		% of Total		Amount		% of Total
Municipal bonds (at fair value) (1):
Investment Grade - Prime	$	72,861		9.8	$	78,730		9.2
Investment Grade - High		511,013		68.4		569,085		66.7
Investment Grade - Upper Medium		152,704		20.4		190,696		22.4
Investment Grade - Lower Medium		3,072		0.4		3,042		0.4
Non-Investment Grade - Speculative		—		-		638		0.1
Not rated		7,354		1.0		10,011		1.2
Total municipal bond portfolio	$	747,004		100.0	$	852,202		100.0

(1) The lowest available rating was used when placing the bond into a category in the table.

Wesbanco’s municipal bond portfolio at December 31, 2020, consists of $134.7 million of taxable (primarily Build America) and $612.3 million of tax-exempt general obligation and revenue bonds. The following table presents additional information regarding the municipal bond type and issuer (at fair value):

TABLE 9. COMPOSITION OF MUNICIPAL SECURITIES

	December 31, 2020				December 31, 2019
(dollars in thousands)	Amount		% of Total		Amount		% of Total
Municipal bond type:
General Obligation	$	518,274		69.4	$	581,105		68.2
Revenue		228,730		30.6		271,097		31.8
Total municipal bond portfolio	$	747,004		100.0	$	852,202		100.0
Municipal bond issuer:
State Issued	$	46,843		6.3	$	76,228		8.9
Local Issued		700,161		93.7		775,974		91.1
Total municipal bond portfolio	$	747,004		100.0	$	852,202		100.0

Wesbanco’s municipal bond portfolio is broadly spread across the United States. The following table presents the top five states of municipal bond concentration based on total fair value at December 31, 2020:

TABLE 10. CONCENTRATION OF MUNICIPAL SECURITIES

	December 31, 2020
(dollars in thousands)	Fair Value		% of Total
Pennsylvania	$	167,754		22.5
Ohio		90,323		12.1
Texas		66,559		8.9
Kentucky		39,372		5.3
West Virginia		36,711		4.9
All other states		346,285		46.3
Total municipal bond portfolio	$	747,004		100.0

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 measurement, refer to Note 17, “Fair Value Measurement” in the Consolidated Financial Statements.

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LOANS AND LOAN COMMITMENTS

Loans represent Wesbanco’s largest balance sheet asset classification and the largest source of interest income. Commercial loans include commercial real estate (“CRE”), which is further differentiated between land and construction, and improved property loans; as well as other commercial and industrial (“C&I”) loans that are not secured by real estate. Retail loans include residential real estate mortgage loans, home equity lines of credit (“HELOC”), and loans for other consumer purposes.

Loan commitments, which are not reported on the balance sheet, represent available balances on commercial and consumer lines of credit, commercial letters of credit, deposit account overdraft protection limits, certain loan guarantee contracts, and approved commitments to extend credit. Approved commitments, which have been accepted by the customer, are included net of any Wesbanco loan balances that are to be refinanced by the new commitment. However, typically not all approved commitments will ultimately be funded.

Loans and loan commitments are summarized in Table 11.

TABLE 11. LOANS AND COMMITMENTS

	December 31,
	2020				2019				2018				2017				2016
(dollars in thousands)	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
LOANS
Commercial real estate:
Land and construction	$	668,277		6.1	$	777,151		7.5	$	528,072		6.9	$	392,597		6.2	$	496,539		7.9
Improved property		5,037,115		46.0		4,947,857		48.0		3,325,623		43.4		2,601,851		40.9		2,376,972		37.9
Total commercial real estate		5,705,392		52.1		5,725,008		55.5		3,853,695		50.3		2,994,448		47.1		2,873,511		45.8
Commercial and industrial (1)		2,407,438		22.0		1,644,699		16.0		1,265,460		16.5		1,125,327		17.7		1,088,118		17.4
Total commercial loans		8,112,830		74.1		7,369,707		71.5		5,119,155		66.8		4,119,775		64.8		3,961,629		63.2
Residential real estate:
Land and construction		138,201		1.3		87,342		0.8		60,336		0.8		56,369		0.9		46,226		0.7
Other mortgages		1,582,760		14.4		1,786,305		17.3		1,551,271		20.2		1,296,932		20.4		1,337,164		21.4
Home equity lines of credit		646,387		5.9		649,678		6.4		599,331		7.8		529,196		8.3		508,359		8.1
Total residential real estate		2,367,348		21.6		2,523,325		24.5		2,210,938		28.8		1,882,497		29.6		1,891,749		30.2
Consumer		309,055		2.8		374,953		3.6		326,188		4.3		339,169		5.3		396,058		6.3
Total retail loans		2,676,403		24.4		2,898,278		28.1		2,537,126		33.1		2,221,666		34.9		2,287,807		36.5
Total portfolio loans		10,789,233		98.5		10,267,985		99.6		7,656,281		99.9		6,341,441		99.7		6,249,436		99.7
Loans held for sale		168,378		1.5		43,013		0.4		8,994		0.1		20,320		0.3		17,315		0.3
Total loans	$	10,957,611		100.0	$	10,310,998		100.0	$	7,665,275		100.0	$	6,361,761		100.0	$	6,266,751		100.0
LOAN COMMITMENTS
Commercial real estate:
Land and construction	$	516,244		16.0	$	811,258		24.9	$	489,991		20.9	$	419,082		22.5	$	392,355		22.0
Improved property		288,316		8.9		317,595		9.7		252,216		10.7		158,565		8.5		151,797		8.6
Total commercial real estate		804,560		24.9		1,128,853		34.6		742,207		31.6		577,647		31.0		544,152		30.6
Commercial and industrial		1,096,449		34.0		1,011,481		31.0		721,988		30.7		571,692		30.7		540,647		30.4
Total commercial    commitments		1,901,009		58.9		2,140,334		65.6		1,464,195		62.3		1,149,339		61.7		1,084,799		61.1
Residential real estate:
Land and construction		90,125		2.8		67,425		2.1		46,285		2.0		29,454		1.6		25,468		1.4
Other mortgages		194,177		6.0		127,916		3.9		38,188		1.6		31,555		1.7		37,418		2.1
Home equity lines of credit		744,349		23.1		698,954		21.4		605,559		25.8		486,516		26.1		447,993		25.2
Total residential real estate		1,028,651		31.9		894,295		27.4		690,032		29.4		547,525		29.4		510,879		28.8
Consumer		50,525		1.6		47,352		1.5		41,037		1.7		36,282		1.9		36,811		2.1
Total retail commitments		1,079,176		33.5		941,647		28.9		731,069		31.1		583,807		31.3		547,690		30.8
Total portfolio commitments		2,980,185		92.4		3,081,981		94.5		2,195,264		93.4		1,733,146		93.0		1,632,489		91.9
Deposit overdraft limits		154,322		4.8		149,519		4.6		153,572		6.5		126,671		6.8		126,517		7.1
Commitments held for sale		91,778		2.8		29,302		0.9		2,307		0.1		3,846		0.2		17,037		1.0
Total loan commitments	$	3,226,285		100.0	$	3,260,802		100.0	$	2,351,143		100.0	$	1,863,663		100.0	$	1,776,043		100.0
Letters of credit included    above	$	53,788		1.7	$	57,205		1.8	$	42,841		1.8	$	31,951		1.7	$	32,907		1.9

(1) Includes $726.3 million of SBA PPP loans at December 31, 2020.

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Total portfolio loans increased $0.5 million or 5.1% from December 31, 2019 to December 31, 2020, due to the origination of $853.1 million of PPP loans during the second and third quarters of 2020.  Excluding PPP loans, total loans decreased over the last twelve months by 2.0% as a higher percentage of new residential loans originated were sold into the secondary market as opposed to holding them in the residential loan portfolio and consumer loan demand decreased as a result of the pandemic reducing consumer spending, as well as lower overall need considering CARES Act stimulus deposits. Commercial real estate loans decreased 0.3% as demand for new construction loans decreased.  Commercial and industrial loans increased 2.2%.  Residential real estate loans decreased 8.1% over the last twelve months, due to a greater portion of new originations sold into the secondary market and a greater portion of existing loans refinanced with other banks, while home equity loans were also refinanced into first mortgages due to customer preferences for fixed rate loans. Portfolio loans are presented in the Consolidated Balance Sheets net of deferred loan fees and costs, and discounts on purchased loans. The net deferred loan income (costs) were $6.2 million and ($4.8) million as of December 31, 2020 and 2019, respectively. Wesbanco conducts a deferred loan cost study to determine the allowable costs to be deferred over the life of the loan. Excluding the effect of PPP loans, in the most recent study, Wesbanco’s deferred costs have increased at a faster rate than the related customer deferred fee income causing the balance of the deferred loan costs to outweigh the deferred loan fees primarily from home equity lines of credit, which have little fee income. Purchased loan discounts from acquisitions included in the portfolio loan balances were $39.4 million and $51.9 million as of December 31, 2020 and 2019, respectively. Loan accretion included in interest income on loans acquired from prior acquisitions was $17.0 million and $17.9 million for the years ended December 31, 2020 and 2019, respectively. As part of loan fees for the year ended December 31, 2020, PPP loan fees were $13.4 million.  At December 31, 2020, $13.8 million of unaccreted net deferred fee income remains on the PPP loans.

CRE loans represent a significant component of the loan portfolio at 52.1% of the total portfolio, which was a 0.3% decrease in loan balances for the year. CRE—land and construction loan balances decreased $108.9 million or 14.0% from December 31, 2019 to December 31, 2020, while CRE—improved property loans increased $89.3 million or 1.8% during the same period.  

C&I loans increased $762.7 million or 46.4% from December 31, 2019 to December 31, 2020, due to PPP loans. The available lines of credit within C&I loans increased 54.8% to 66.1% of total C&I revolving lines of credit exposure as of December 31, 2020. The acquisitions of FTSB, FFKT and OLBK resulted in obtaining new customer relationships and provides new opportunities in the Huntington, WV market and an expanded presence in the greater Lexington, Frankfort, Elizabethtown, Louisville, KY, and Cincinnati, OH markets, as well as new markets in Washington, D.C.; Baltimore, MD; Lexington Park, MD; and Frederick – Gaithersburg – Rockville, MD MSAs.

Residential real estate mortgage loans decreased $152.7 million or 8.1% from December 31, 2019 to December 31, 2020, due to increased secondary market sales. Wesbanco retained approximately 38.1% of mortgages by dollar volume originated in 2020 for the portfolio compared to 52.4% in 2019. Management’s focus was to originate more loans for the secondary market, particularly longer-term refinanced mortgage loans.  As mortgage rates change, management adjusts loans sold into the secondary market at higher gain-on-sale margins versus retaining balances in the loan portfolio, somewhat dependent upon customer demand for various mortgage products and related terms.

HELOC loans decreased $3.3 million or 0.5% from December 31, 2019 to December 31, 2020 due to lower demand and refinancing into first mortgage loans at low, fixed rates.  

Consumer loans decreased $65.9 million or 17.6% from December 31, 2019 to December 31, 2020 due to a decreased focus on indirect automobile loans.

Total loan commitments decreased $34.5 million or 1.1% from December 31, 2019 to December 31, 2020. Commitments in the total CRE portfolio decreased approximately $324.3 million or 28.7%, C&I commitments increased $85.0 million or 8.4% and HELOC commitments increased $45.4 million or 6.5%. Lower CRE commitments are the result of lower demand for new construction loans, particularly hospitality-related, during the pandemic.

Geographic Distribution —Wesbanco extends credit primarily within the market areas where it has branch offices or markets adjacent thereto. Loans outside of these markets are generally only made to established customers that have other business relationships with Wesbanco in its markets. Loans outside of Wesbanco’s markets represented approximately 1% of total loans at December 31, 2020 and December 31, 2019, respectively. These loans consist primarily of CRE-improved property loans, residential real estate loans for second residences or vacation homes, consumer purpose lines of credit to wealth management customers, and automobile loans to family members of local customers. Management does not plan to significantly increase out-of-market loans.

The geographic distribution of the loan portfolio, excluding deposit overdraft limits and loans held for sale, is summarized in Table 12.

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TABLE 12. GEOGRAPHIC DISTRIBUTION OF LOANS

	December 31, 2020 (1)
	Commercial Real Estate
(percentage of outstandings, rounded to nearest whole percent)	Land and Construction			Improved Property			Commercial and Industrial			Residential Real Estate			Home Equity Lines			Consumer			Total
Upper Ohio Valley MSAs		1	%		6	%		14	%		7	%		13	%		23	%		8	%
Morgantown, WV MSA		2			4			1			3			4			6			3
Parkersburg, WV-Marietta, OH MSA		1			1			1			1			3			4			1
Huntington, WV-Ashland, KY MSA		1			3			2			3			3			4			3
Pittsburgh, PA MSA		7			9			11			15			17			11			10
Columbus, OH MSA		35			11			8			10			6			4			11
Western Ohio MSAs		17			11			3			14			11			3			9
Louisville, KY—Jefferson County MSA		16			7			3			4			5			2			6
Lexington, KY—Fayette County MSA		6			7			1			3			3			1			4
Baltimore-Columbia-Towson MD MSA		1			6			3			10			4			3			5
California-Lexington Park MD MSA		—			1			1			1			1			—			1
Frederick-Gaithersburg-Rockville MD MSA		—			—			—			2			2			1			—
Washington-Arlington-Alexandria    DC-VA-MD-WV MSA		4			7			41			4			2			1			17
Other West Virginia Locations		3			4			2			6			9			17			3
Other Pennsylvania Locations		—			—			—			1			2			4			1
Other Ohio Locations		5			17			5			7			9			11			12
Other Indiana Locations		—			1			—			1			—			1			1
Other Kentucky Locations		1			4			3			5			6			2			4
Other Maryland Locations		—			—			—			1			—			1			—
Adjacent States & Outside-of-Market		—			1			1			2			—			1			1
Total		100	%		100	%		100	%		100	%		100	%		100	%		100	%

(1)  Real estate secured loans are categorized based on the address of the collateral. All other loans are categorized based on the borrower’s address.

The Upper Ohio Valley Metropolitan Statistical Areas (“MSAs”) include the Wheeling, West Virginia and Weirton, West Virginia-Steubenville, Ohio MSAs. Other West Virginia locations include the Fairmont-Clarksburg and Charleston MSAs as well as communities that are not located within an MSA primarily in the northern, central and eastern parts of the state. The western Ohio MSAs include the Dayton-Springfield and the Cincinnati-Middletown MSAs. Other Ohio locations include communities in Ohio that are not located within an MSA, the majority of which are located in southeastern Ohio. Other Indiana locations include communities in Indiana that are not located within an MSA, the majority of which are located in southern Indiana. Other Kentucky locations include the Elizabethtown KY MSA along with other Kentucky locations that are not located within an MSA. Through the acquisition of OLBK, Wesbanco added the Baltimore-Columbia-Towson, MD MSA, Frederick-Gaithersburg-Rockville, MD MSA and Washington DC-Arlington-Alexandria, VA MSA as well as other Maryland locations. Adjacent states include parts of Delaware and Tennessee that are within close proximity to Wesbanco’s markets. Outside-of-market loans consist of loans in all other locations not included in any of the other defined areas and have remained relatively unchanged over the past few years.

CREDIT RISK

The risk that borrowers will be unable or unwilling to repay their obligations is inherent in all lending activities. Repayment risk can be impacted by external events such as adverse economic conditions, social and political influences that impact entire industries or major employers, individual loss of employment or other personal calamities and changes in interest rates. This inherent risk may be further exacerbated by the terms and structure of each loan as well as potential concentrations of risk. The primary goal of managing credit risk is to minimize the impact of all of these factors on the quality of the loan portfolio.

Credit risk is managed through the initial underwriting process as well as through ongoing monitoring and administration of the portfolio. 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 focuses on the sufficiency and sustainability of the primary source of repayment, the adequacy of collateral, if any, as a secondary source of repayment, potential for guarantor support, as a tertiary source of repayment and other factors unique to each type of loan that may increase or mitigate their risk. The manner and degree of monitoring and administration of the portfolio varies by type and size of loan.

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Credit risk is also managed by closely monitoring delinquency levels and trends and initiating collection efforts at the earliest stage of delinquency. Wesbanco also monitors general economic conditions, including unemployment, housing activity and real estate values in its markets. Underwriting standards are modified when appropriate based on market conditions, the performance of one or more loan categories, and other external factors. An independent loan review function also performs periodic reviews of the portfolio to assess the adequacy and effectiveness of underwriting, loan documentation and portfolio administration.

Each category of loans contains distinct elements of risk that impact the manner in which those loans are underwritten, structured, documented, administered and monitored. Customary terms and underwriting practices, together with specific risks associated with each category of loans and Wesbanco’s processes for managing those risks are discussed in the remainder of this section.

Commercial Loans —The commercial portfolio consists of loans to a wide range of business enterprises of varying size. Many commercial loans often involve multiple loans to one borrower or a group of related borrowers, therefore the potential for loss on any single transaction can be significantly greater for commercial loans than for retail loans. Commercial loan risk is mitigated by limiting total credit exposure to individual borrowers or groups of borrowers, industries and geographic markets and by requiring appropriate collateral or guarantors.

Commercial loans are monitored for potential concentrations of loans to any one borrower or group of related borrowers. At December 31, 2020, Wesbanco’s legal lending limit to any single borrower or their related interests approximated $248 million. The ten largest commercial relationships combined ranged from $690 million to $725 million during 2020.  There were 13 relationships that exceeded $50 million at December 31, 2020. These large relationships generally consist of more than one loan to a borrower or their related entities. The single largest relationship exposure approximated $113 million at December 31, 2020 and consists of multiple loans to a business relationship in the lodging sector.

Commercial loans, including renewals and extensions of maturity, are approved within a framework of individual lending authorities based on the total credit exposure of the borrower. Loans with credit exposure up to $750,000 are approved by underwriters that are not responsible for loan origination. Loans with credit exposure greater than $750,000 minimally require the approval of a commercial banking executive, and credit exposures greater than $1.5 million require approval of a credit officer that is not responsible for loan origination. In the new Mid-Atlantic market, credit exposures greater than $5 million require approval of a credit committee comprised of senior management in the market and credit officers not responsible for loan origination.  Credit exposures greater than $15 million require approval of a centralized credit committee comprised of executive management, directors, and certain other non-voting qualified persons that are not responsible for loan origination. Underwriters and credit officers do not receive incentive compensation based on loan origination volume. Commercial banking executives receive incentive compensation based on multiple factors that include loan origination, net growth in outstanding loan balances, fees, credit quality and portfolio administration requirements.

CRE – land and construction consists of loans to finance land for development, investment, use in a commercial business enterprise, agricultural or minerals extraction, construction of residential dwellings for resale, multi-family apartments and other commercial buildings that may be owner-occupied or income generating investments for the owner. Construction loans generally are made only when Wesbanco also commits to the permanent financing of the project, has a takeout commitment from another lender for the permanent loan or the loan is expected to be repaid from the sale of subdivided property. However, even if Wesbanco has a takeout commitment, construction loans are underwritten as if Wesbanco will retain the loan upon completion of construction. In recent years, due to the low interest rate environment and low property capitalization rates, many construction loans that did not have a takeout commitment when the loan originated have been sold or refinanced in the secondary market immediately upon completion of construction, at times, resulting in significant unscheduled loan payoffs.

CRE – land and construction loans require payment of interest-only during the construction period, with initial terms ranging from six months up to three years for larger, multiple-phase projects, such as residential housing developments and large scale commercial projects. Interest rates are often fully-floating based on an appropriate index, but may be structured in the same manner as the interest rate that will apply to the permanent loan upon completion of construction. Interest during the construction period is typically included in the project costs and therefore is often funded by loan advances. Advances are monitored to ensure that the project is at the appropriate stage of completion with each advance and that interest reserves are not exhausted prior to completion of the project. In the event a project is not completed within the initial term, the loan is re-underwritten at maturity, but interest beyond the initial term must be paid by the borrower and in some instances an additional interest reserve is required as a condition of extending the maturity. Upon completion of construction, the loan is converted to permanent financing and reclassified to CRE—improved property.

CRE – improved property loans consist of loans to purchase or refinance owner-occupied and investment properties. Owner-occupied CRE consists of loans to borrowers in a diverse range of industries and property types. Investment properties include multi-family apartment buildings, 1-to-4 family rental units, lodging and various types of commercial buildings that are rented or leased to unrelated parties of the owner.

CRE – improved property loans generally require monthly principal and interest payments based on amortization periods ranging from ten to twenty-five years depending on the type, age and condition of the property. Loans with amortization periods exceeding twenty years typically also have a maturity date or call option of ten years or less. Interest rates are generally adjustable after a fixed period ranging from one to five years based on an appropriate index of comparable duration. Interest rates may also be fixed for longer than five years and certain loans

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from acquisitions may have longer initial fixed rate terms. For certain larger loans, the borrower may be required to enter into an interest rate derivative contract that converts Wesbanco’s rate to an adjustable rate.

C&I loans consist of revolving lines of credit to finance accounts receivable, inventory and other general business purposes; term loans to finance fixed assets other than real estate, and letters of credit to support trade, insurance or governmental requirements for a variety of businesses. Most C&I borrowers are privately-held companies with annual sales up to $100 million.

C&I term loans secured by equipment and other types of collateral generally require monthly principal and interest payments based on amortization periods up to ten years depending on the estimated useful life of the collateral, with interest rates that may be fixed for the term of the loan (potentially via an interest rate derivative contract) or adjustable after a fixed period ranging from one to seven years based on an appropriate index.

Commercial lines and letters of credit are generally categorized as C&I but may also be categorized as CRE—improved property loans or CRE—land and construction if they are secured primarily by real estate. Lines of credit typically require payment of interest-only with principal due on demand or at maturity. Interest rates on lines of credit are generally fully-adjustable based on an appropriate short-term index. Letters of credit typically require a periodic fee with principal and interest due on demand in the event the beneficiary of the letter requests an advance on the commitment. Lines of credit may also include a fee based on the amount of the line that is not advanced. Lines and letters of credit are generally renewable or may be cancelled annually by Wesbanco, but may also be committed for up to three years for certain small business lines and certain letters of credit. Letters of credit may also require Wesbanco to notify the beneficiary within a specified time in the event Wesbanco does not intend to renew or extend the commitment.

Table 13 summarizes the distribution of maturities by rate type for all commercial loans.

TABLE 13. MATURITIES OF COMMERCIAL LOANS

	December 31, 2020
	Fixed Rate Loans								Variable Rate Loans
(in thousands)	In One Year or Less		After One Year Through Five Years		After Five Years		Total		In One Year or Less		After One Year Through Five Years		After Five Years		Total
Commercial real estate:
Land and construction	$	61,242	$	45,393	$	36,166	$	142,801	$	118,051	$	270,971	$	136,454	$	525,476
Improved property		233,329		915,237		491,938		1,640,504		226,260		712,175		2,458,176		3,396,611
Commercial and industrial		67,821		1,205,254		223,566		1,496,641		300,547		237,969		372,281		910,797
Total commercial loans	$	362,392	$	2,165,884	$	751,670	$	3,279,946	$	644,858	$	1,221,115	$	2,966,911	$	4,832,884

The primary factors considered in underwriting CRE—land and construction loans are the overall viability of each project, the experience and financial capacity of the developer or builder to successfully complete the project, market absorption rates and property values. These loans also have the unique risk that the developer or builder may not complete the project, or not complete it on time or within budget. Risk is generally mitigated by extending credit to developers and builders with established reputations who operate in Wesbanco’s markets and have the liquidity or other resources to absorb unanticipated increases in the cost of a project or longer than anticipated absorption, periodically inspecting construction in progress, and disbursing the loan at specified stages of completion. Certification of completed construction by a licensed architect or engineer and performance and payment bonds may also be required for certain types of projects. Since speculative projects are inherently riskier, Wesbanco may require a specified percentage of pre-sales for land and residential development or pre-lease commitments for investment property before construction can begin.

The primary factors that are considered in underwriting investment real estate are the debt service coverage calculation, the net rental income generated by the property, the composition of the tenants occupying the property, and the terms of leases, all of which may vary depending on the specific type of property. Other factors that are considered include the overall financial capacity of the investors and their experience owning and managing investment property.

Repayment of owner-occupied loans must come from the cash flow generated by the occupant’s commercial business. Therefore, the primary factors that are considered in underwriting owner-occupied CRE and C&I loans are the debt service coverage calculation, the historical and projected earnings, cash flow, capital resources, liquidity and leverage of the business. Other factors that are considered for their potential impact on repayment capacity include the borrower’s industry, competitive advantages and disadvantages, demand for the business’ products and services, business model viability, quality, experience and depth of management, and external influences that may impact the business such as general economic conditions and social or political changes.

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The type, age, condition and location of real estate as well as any environmental risks associated with the property are considered for both owner-occupied and investment CRE. Environmental risk is mitigated by requiring assessments performed by qualified inspectors whenever the current or previous uses of the property or any adjacent properties are likely to have resulted in contamination of the property financed. Risk is further mitigated by requiring borrowers to have adequate down payments or cash equity, thereby limiting the loan amount in relation to the lower of the cost or the market value of the property, unless there are sufficient mitigating factors that would reduce the risk of a higher loan-to-value. Market values are determined by obtaining current appraisals or evaluations, whichever is appropriate or required by banking regulations based on the amount financed prior to the loan being made. New appraisals or evaluations may be obtained throughout the life of each loan to more accurately assess current market value when the initial term of a loan is being extended, market conditions indicate that the property value may have declined, and/or the primary source of repayment is no longer adequate to repay the loan under its original terms.

CRE loan-to-value (“LTV”) ratios are generally limited to the maximum percentages prescribed by Wesbanco credit policy or banking regulations, which range from 65% for unimproved land to 85% for improved commercial property. Regulatory guidelines also limit the aggregate of CRE loans that exceed prescribed LTV ratios to 30% of the Bank’s total risk-based capital. The aggregate of all CRE loans and loan commitments that exceeded the regulatory guidelines approximated $96 million or 6% of the Bank’s total risk-based capital at December 31, 2020, compared to $113 million or 8% at December 31, 2019. Regardless of credit policy or regulatory guidelines, lower LTV ratios may be required for certain types of properties or when other factors exist that increase the risk of volatility in market values such as single or special-use properties that cannot be easily converted to other uses or may have limited marketability. Conversely, higher LTV ratios may be acceptable when there are other factors to adequately mitigate the risk.

The type and amount of collateral for C&I loans varies depending on the overall financial strength of the borrower, the amount and terms of the loan, and available collateral or guarantors. Loans secured by bank deposit accounts and marketable securities represent the lowest risk. Marketable securities are subject to changes in market value and are monitored regularly to ensure they remain appropriately margined. The total of C&I exposure secured by bank deposit accounts and marketable securities approximated $297 million at December 31, 2020 compared to $281 million at December 31, 2019. Unsecured C&I loans, which represent the highest risk, approximated $1,002 million at December 31, 2020, compared to $251 million at December 31, 2019. Of the unsecured total at December 31, 2020, $726 million are SBA-guaranteed PPP loans.  Unsecured credit is only extended to those borrowers that exhibit consistently strong repayment capacity and the financial condition to withstand a temporary decline in their operating cash flows. The single largest unsecured exposure is $5.5 million. Collateral other than real estate that fluctuates with business activity, such as accounts receivable and inventory, may also be subject to regular reporting and certification by the borrower and, in some instances, independent inspection or verification by Wesbanco. Approximately $198 million or 12% of C&I exposure (excluding PPP loans) at December 31, 2020 is secured solely by accounts receivable and inventory, compared to $199 million or 7.8% at December 31, 2019. Another $255 million or 15% of C&I exposure (excluding PPP loans) is secured by equipment or motorized vehicles at December 31, 2020, compared to $301 million or 11.9% at December 31, 2019. The remainder of the C&I portfolio is secured by multiple types of collateral, which at times includes real estate that is taken as collateral for reasons other than its value.

Most commercial loans are originated directly by Wesbanco. Participation in loans originated by other financial institutions represents $568 million or 5.7% of total commercial loan exposure at December 31, 2020 compared to $513 million or 5.5% at December 31, 2019. Included in this total are Shared National Credits of $15 million at December 31, 2020 and $46 million at December 31, 2019. Shared National Credits are defined as loans in excess of $100 million that are financed by three or more lending institutions. Wesbanco performs its own customary credit evaluation and underwriting before purchasing loan participations. The credit risk associated with these loans is similar to that of loans originated by Wesbanco, but additional risk may arise from the limited ability to control the actions of the lead, agent or servicing institution.

The commercial portfolio is monitored for potential concentrations of credit risk including by market, CRE property type, C&I industry, loan type and loans affected by similar external factors.

Beginning in 2001 and revised in 2013, banks of a certain size are required to track C&I loan transactions designated as Highly Leveraged Transactions (“HLTs”).  Loans that meet the criteria must be of a certain size, for the purpose of a buyout, acquisition or capital distributions and meet certain leverage ratios.  As of December 31, 2020, Wesbanco had $38.5 million or 0.4% of total commercial loan exposure designated as HLTs, as compared to $43.5 million or 0.3% as of December 31, 2019.

Due to fluctuations in energy prices, the bank closely monitors its energy portfolio. At December 31, 2020, total exposure to core energy industries such as drilling, extraction, pipeline construction, mining equipment, investment real estate with energy-related tenants and other related support activities approximated $60 million or 0.6% of the total commercial loan portfolio, as compared to $67 million or 0.7% of the total commercial loan portfolio at December 31, 2019. Exposure to ancillary industries such as utility distribution and transportation, engineering services, manufacturers and retailers of other heavy equipment used in core energy industries, approximates an additional $113 million in exposure or 1.1% of the total loan portfolio, as compared to $94 million or 0.9% of the total loan portfolio at December 31, 2019. Lodging properties located in the shale gas areas that may be impacted by a reduction in shale gas activities represent an additional $130 million of exposure at December 31, 2020, as compared to $119 million at December 31, 2019.  The increase is due to the reclassification of two hotels in first quarter of 2020, as drilling activity expanded, and does not represent an overall increase in lodging exposure.

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TABLE 14. COMMERCIAL EXPOSURE BY INDUSTRY

	December 31, 2020
	Land and Construction				Improved Property				Commercial and Industrial				PPP
(in thousands)	Balance		Commitment		Balance		Commitment		Balance		Commitment		Loan Balance		Total Loan Balance		Total Exposure		% of Capital (1)
Agriculture and farming	$	19,008	$	1,561	$	3,075	$	848	$	8,311	$	5,642	$	2,620	$	33,014	$	41,065		2.4
Energy		1,515		—		42,160		1,649		94,168		88,641		9,043		146,886		237,176		14.1
Construction		94,129		77,627		139,310		33,388		161,554		169,724		136,709		531,702		812,441		48.2
Manufacturing		130		7,004		89,291		13,830		149,991		122,682		64,921		304,333		447,849		26.6
Wholesale and distribution		197		3		44,414		1,537		117,603		72,092		29,180		191,394		265,026		15.7
Retail		3,074		5,193		271,660		6,982		98,296		70,490		36,846		409,876		492,541		29.2
Transportation and warehousing		14,493		4,342		67,245		16,679		40,346		16,353		21,320		143,404		180,778		10.7
Information and communications		1,124		476		10,455		121		7,764		8,360		3,740		23,083		32,040		1.9
Finance and insurance		559		108		12,507		3,421		92,150		128,485		9,931		115,147		247,161		14.7
Equipment leasing		—		—		21,423		432		52,971		29,334		11,785		86,179		115,945		6.9
Real estate - 1-4 family		2,960		1,700		290,304		10,487		54,106		4,653		—		347,370		364,210		21.6
Real estate - multi-family		283,075		195,324		479,543		29,577		12,212		1		—		774,830		999,732		59.3
Real estate - other retail		1,894		1,206		244,936		4,022		5,396		5		—		252,226		257,459		15.3
Real estate - shopping center		5,884		6,656		284,655		8,467		1,971		—		—		292,510		307,633		18.3
Real estate - office building		22,106		6,866		528,828		18,114		10,549		2,480		—		561,483		588,943		34.9
Real estate - commercial/manufacturing		3,638		1,937		365,682		11,568		11,130		1		—		380,450		393,956		23.4
Real estate - residential buildings		49,830		68,166		128,883		17,648		27,370		16,681		6,612		212,695		315,190		18.7
Real estate - other		49,994		39,276		431,984		40,073		48,955		27,935		7,327		538,260		645,544		38.3
Services		2,476		1,229		198,897		9,058		166,649		106,546		118,124		486,146		602,979		35.8
Schools and education services		21,490		2,530		34,291		509		98,877		15,349		7,437		162,095		180,483		10.7
Healthcare		40,236		60,396		348,807		7,567		127,970		61,450		80,523		597,536		726,949		43.1
Entertainment and recreation		1,225		2,709		50,259		1,332		13,893		5,536		8,650		74,027		83,604		5.0
Hotels		8,549		10,123		711,758		17,002		5,086		2,542		12,099		737,492		767,159		45.5
Other accommodations		285		6,961		32,671		318		4,106		381		566		37,628		45,288		2.7
Restaurants		1,780		2,080		100,865		4,242		62,496		22,160		37,889		203,030		231,512		13.7
Religious organizations		1,488		4,193		79,091		2,481		38,129		21,282		7,718		126,426		154,382		9.2
Government		34,056		2,800		17,028		642		128,984		34,880		4,838		184,906		223,228		13.2
Unclassified		3,082		5,778		7,093		26,322		40,149		62,764		108,378		158,702		253,566		15.0
Total commercial loans	$	668,277	$	516,244	$	5,037,115	$	288,316	$	1,681,182	$	1,096,449	$	726,256	$	8,112,830	$	10,013,839		594.1

(1) Represents Bank’s total risk-based capital.

Multi-family apartments represent the single largest category of commercial loans. Multi-family apartment exposure increased 25.8% from $794 million at December 31, 2019 to $1,000 million at December 31, 2020. This exposure represents 59.3% of total risk-based capital at December 31, 2020, up from 53.0% at December 31, 2019. Approximately 54% of the total multi-family exposure is for new construction projects, many of which are expected to be refinanced in the secondary market over the next 24 months. During 2020, a number of properties were refinanced in the secondary market shortly after completion and prior to stabilization. These early payoffs enabled Wesbanco to continue to finance new multi-family projects throughout our market. The central Ohio market represents approximately 33% of the total multi-family apartment exposure as of December 31, 2020, compared to 28% at December 31, 2019, and the Maryland market represents approximately 15% of the total multi-family apartment exposure as of December 31, 2020, compared to 12% as of December 31, 2019. The Louisville KY market was the next largest market in 2020 at 10%.

Construction represents the second largest category of commercial loan exposure of $812 million. Construction exposure increased 2.2% from December 31, 2019 to December 31, 2020. This represents 48.2% of total risk-based capital at December 31, 2020, compared to 53.0% at December 31, 2019. Construction-coded loans are broken down between 1-4 family homes built for sale, lot development and general trade.   Approximately 30% of the construction exposure is in the Maryland market and 17% is located in the upper Ohio Valley market.

Lodging represents the third largest category of commercial exposure with total exposure of $767 million.  Due to the pandemic’s effect on the lodging industry, the Bank is closely monitoring this portfolio. Lodging exposure increased 11.2% from December 31, 2019 to December 31, 2020. This category represents 45.5% of risk-based capital, compared to 46.1% at December 31, 2019.  Approximately 40% of lodging exposure is held in the Maryland markets and approximately 18% is held in central Kentucky.

Healthcare represents the fourth largest category of commercial exposure with total exposure of $727 million. Healthcare exposure increased 11.4% from December 31, 2019 to December 31, 2020. This category represents 43.1% of risk-based capital, compared to 43.5% at

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December 31, 2019.  Approximately 26% of healthcare exposure is in central Ohio market, 18% in the upper Ohio Valley market and 16% in Maryland market.

Real estate—other represents the fifth largest category of commercial exposure with total exposure of $646 million. Real estate—other exposure decreased 8.1% from December 31, 2019 to December 31, 2020. This category represents 38.3% of risk-based capital, compared to 46.9% at December 31, 2019.  Real estate – other consists of property types such as box stores, eating facilities and mixed use.  Approximately 38% of the exposure is held in the Maryland market, 14% in the Pittsburgh/western PA market and 10% in the Lexington/central Kentucky market.

Services represents the sixth largest category of commercial exposure with total exposure of $603 million. Services increased 17.9% from December 31, 2019 to December 31, 2020. This category represents 35.8% of risk-based capital, compared to 34.1% at December 31, 2019.  Approximately 29% of the exposure is held in the Maryland market and 28% is held in the upper Ohio Valley market.

In addition to the methods in which Wesbanco monitors the CRE portfolio for possible concentrations of risk, the regulatory agencies use a two-tiered assessment to determine whether a bank has an overall concentration of CRE lending as a percentage of bank total risk-based capital. Loan balances used to determine compliance are based upon Call Report instructions and therefore do not necessarily match the balances displayed in Table 14. The first tier measures loans for land, land development, residential and commercial construction. This tier totals $768 million or 45.5% of total risk-based capital at December 31, 2020, compared to $792 million or 52.9% at December 31, 2019. The regulatory guidance for the first tier is 100% of total risk-based capital. The second tier measures loans included in the first tier plus multi-family apartments and other commercial investment property. This tier totals $4,229 million or 250.9% of total risk-based capital at December 31, 2020, compared to $4,019 million or 268.2% at December 31, 2019. The regulatory guidance for the second tier is 300% of total risk-based capital. The regulatory agencies also consider whether a bank’s CRE portfolio has increased by 50% or more within the prior thirty-six months of the assessment date. Total CRE exposure increased $2,056 million or 90.6% for the thirty-six month period ended December 31, 2020, primarily from acquisition-related growth. Management believes that although the bank is above the 50% threshold, portfolio credit quality and our internal risk management practices mitigate the risk of continued CRE lending.

Basel III requires banks to identify High Volatility Commercial Real Estate (“HVCRE”) loans in their portfolios. These loans are subject to 150% weighting in the risk-based capital calculation, effective January 1, 2015. These regulations require, among other things, that investment CRE loans for acquisition, development or construction that are not in permanent amortizing loan status, meet the statutory LTV guidelines, have a minimum contributed equity of 15% in cash, marketable securities or contributed land at appraised value, and the loan documentation must contain a requirement that the initial capital injection remain in the project until the loan has converted to permanent financing or is paid in full. Changes to the law in May, 2018 eliminated certain CRE loan categories from being subject to the regulation, such as owner-occupied, changed contributed land value from cost to appraised value for the equity component and required only the initial capital to meet the 15% threshold remain in the project. The bank has approximately $169 million in HVCRE exposure representing 2.6% of total CRE exposure and 10.1% of total risk-based capital at December 31, 2020. This compares to $335 million in HVCRE exposure representing 4.9% of total CRE exposure and 22% of total risk-based capital at December 31, 2019. A portion of these loans are classified as HVCRE primarily for legal documentation reasons, rather than contributed equity being less than 15%.

TABLE 15. COMMERCIAL LOANS UNDER DEFERRAL BY INDUSTRY

	December 31, 2020
	Land and Construction				Improved Property				Commercial and Industrial								Percent Modified
(in thousands)	Balance		Commitment		Balance		Commitment		Balance		Commitment		Total Loan Balance		Total Exposure		Balance	Exposure
Manufacturing	$	—	$	—	$	—	$	—	$	1,470	$	—	$	1,470	$	1,470	0.5%	0.3%
Real estate - 1-4 family		—		—		32		—		—		—		32		32	0.0%	0.0%
Real estate - office building		—		—		196		—		—		—		196		196	0.0%	0.0%
Services		—		—		844		—		—		—		844		844	0.2%	0.1%
Entertainment and recreation		—		—		113		—		—		—		113		113	0.2%	0.1%
Hotels		—		—		149,503		216		—		—		149,503		149,719	20.3%	19.5%
Restaurants		—		—		992		—		1,162		—		2,154		2,154	1.1%	0.9%
Government		—		—		—		—		166		—		166		166	0.1%	0.1%
Total modified commercial loans	$	—	$	—	$	151,680	$	216	$	2,798	$	—	$	154,478	$	154,694	1.9%	1.5%

Under the CARES Act, Wesbanco modified a total of 3,550 loans totaling $2.2 billion in 2020, of which a total of $171.1 million, representing 1.6% of total portfolio loans were in their deferral period as of December 31, 2020.  These deferrals consisted of $154.5 million of commercial loans, representing 1.9% of the commercial loan portfolio, with a majority of the other deferrals occurring in the residential real estate portfolio. Another $99.1 million had payment terms modified to provide in the majority of cases principal relief during 2021 in return for an enhancement in terms. Changes could include an increase in floor rates, an increase in guarantors and a change in covenants. None of the aforementioned loans were delinquent as of December 31, 2020. Wesbanco met the needs of the communities it serves by providing appropriate relief tailored to the individual needs of the customer, ranging from three months of interest-only for those minimally impacted, up to and including full principal and interest deferral for six months for those significantly impacted, while also providing additional tailored relief to the hospitality industry where appropriate.  The relief was provided in as many as three phases depending on the circumstances.

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On August 3, 2020, the joint federal regulatory agencies issued a statement, “Joint Statement on Additional Loan Accommodations Related to COVID-19”. This statement provides financial institutions with considerations for certain customers nearing the end of their COVID-19 loan deferral period noted above.  In the fourth quarter of 2020, Wesbanco offered up to an additional twelve months of deferred payments to certain commercial loan customers, predominantly in the hospitality industry, based on specific criteria related to the borrower, the underlying property and the potential for guarantors/co-borrowers. For loan modifications permitted under the CARES Act and the joint interagency guidance, there were $149.5 million or 8.9% of total risk-based capital of hotel loans in deferral as of December 31, 2020. These modifications made for the hotel customers provided up to 12 months of interest-only payments.  A minority of those loans had deferment of principal and interest for up to three months before reverting to interest-only payments for the remaining nine months.  As a part of the modifications, a provision was included that certain financial tests would be completed quarterly during 2021, and should the customer meet certain ratios, a return to the original payment terms would recommence.

TABLE 16. COMMERCIAL LOANS UNDER DEFERRAL BY MODIFICATION TYPE

	December 31, 2020
	Three Months Principal & Interest Plus Three Months Principal Only Deferral		Three Months Principal & Interest Deferral		Six Months Principal & Interest Deferral		Phase Three Deferral
(in thousands)	Loan Balance		Loan Balance		Loan Balance		Loan Balance		Total Loan Balance
Manufacturing	$	1,470	$	—	$	—	$	—		1,470
Real estate - 1-4 family		32		—		—		—		32
Real estate - office building		—		196		—		—		196
Services		—		844		—		—		844
Entertainment and recreation		113		—		—		—		113
Hotels		—		—		—		149,503		149,503
Restaurants		—		—		2,154		—		2,154
Government		—		166		—		—		166
Total modified commercial loans	$	1,615	$	1,206	$	2,154	$	149,503	$	154,478

Retail Loans —Retail loans are a homogenous group, generally consisting of standardized products that are smaller in amount and distributed over a larger number of individual borrowers. This group is comprised of residential real estate loans, home equity lines of credit and consumer loans.

Residential real estate consists of loans to purchase, construct or refinance the borrower’s primary dwelling, second residence or vacation home. Residential real estate also includes approximately $17 million of 1-to-4 family rental properties at December 31, 2020, a decrease from approximately $19 million at December 31, 2019. Wesbanco originates residential real estate loans for its portfolio as well as for sale in the secondary market. Portfolio loans also include loans to finance vacant land upon which the owner intends to construct a dwelling at a future date. Except for construction loans that require interest-only payments during the construction period, portfolio loans require monthly principal and interest payments to amortize the loan with terms up to thirty years. Construction periods range from six to twelve months, but may be longer for larger residences. Loans for vacant land generally begin amortizing immediately and are refinanced when the owner begins construction of a dwelling. Interest rates on portfolio loans may be fixed for up to thirty years. Adjustable rate loans are based primarily on the Treasury Constant Maturity index and can adjust annually or in increments up to 15 years, although most 30 and 15 year fixed-rate originations are sold into the secondary market.

HELOC loans are secured by first or second liens on a borrower’s primary residence or second home. HELOCs are generally limited to an amount which when combined with the first mortgage on the property, if any, does not exceed 90% of the market value. Maximum LTV ratios are also tiered based on the amount of the line and the borrower’s credit history. Most HELOCs originated prior to 2005 are available for draws by the borrower for up to fifteen years, at which time the outstanding balance is converted to a term loan requiring monthly principal and interest payments sufficient to repay the loan in not more than seven years. Most HELOCs originated from 2005 through 2013 are available to the borrower for an indefinite period as long as the borrower’s credit characteristics do not materially change, but may be cancelled by Wesbanco under certain circumstances. Generally, lines originated since 2013 have a 15 year draw period, a ten-year repayment period and also give borrowers the option to convert portions of the balance of their line into an installment loan requiring monthly principal and interest payments, with availability to draw on the line restored as the installment portions are repaid.

Consumer loans consist of installment loans originated directly by Wesbanco and indirectly through dealers to finance purchases of automobiles, trucks, motorcycles, boats, and other recreational vehicles; home equity installment loans, unsecured home improvement loans, and revolving lines of credit that can be secured or unsecured. The maximum term for installment loans is generally eighty-four months for automobiles, trucks, motorcycles and boats; one hundred eighty months for travel trailers; one hundred twenty months for home equity/improvement loans; and sixty months if the loan is unsecured. Maximum terms may be less depending on age of collateral. In January 2018, the bank decided to no longer underwrite indirect loans for motorcycles, recreational vehicles, trailers, boats or off-road vehicles to reduce the overall risk profile of the portfolio. Revolving lines of credit are generally available for an indefinite period of time as long as the

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borrower’s credit characteristics do not materially change, but may be cancelled by Wesbanco under certain circumstances. Interest rates on installment obligations are generally fixed for the term of the loan, while lines of credit are adjustable daily based on the Prime Rate.

TABLE 17. MATURITIES OF RETAIL LOANS

	December 31, 2020
	Fixed Rate Loans								Variable Rate Loans
(in thousands)	In One Year or Less		After One Year Through Five Years		After Five Years		Total		In One Year or Less		After One Year Through Five Years		After Five Years		Total
Residential real estate	$	21,954	$	74,743	$	457,739	$	554,436	$	132	$	17,475	$	1,148,918	$	1,166,525
Home equity lines of credit		477		11,636		19,866		31,979		11,654		63,157		539,597		614,408
Consumer		6,327		223,117		44,182		273,626		3,404		12,964		19,061		35,429
Total retail loans	$	28,758	$	309,496	$	521,787	$	860,041	$	15,190	$	93,596	$	1,707,576	$	1,816,362

The primary factors that are considered in underwriting retail loans are the borrower’s credit history and their current and reasonably anticipated ability to repay their obligations as measured by their total debt-to-income ratio. Portfolio residential real estate loans are generally underwritten to secondary market lending standards using automated underwriting systems developed for the secondary market that rely on empirical data to evaluate each loan application and assess credit risk. The amount of the borrower’s down payment is an important consideration for residential real estate, as is the borrower’s equity in the property for HELOCs. It is common practice to finance the total amount of the purchase price of motor vehicles and other consumer products plus certain allowable additions for tax, title, service contracts and credit insurance.

Risk is further mitigated by requiring residential real estate borrowers to have adequate down payments or cash equity, thereby limiting the loan amount in relation to the lower of the cost or the market value of the property, unless there are sufficient mitigating factors that would reduce the risk of a higher loan-to-value. Market values are determined by obtaining current appraisals or evaluations, whichever is appropriate or required by banking regulations based on the amount financed prior to the loan being made. New appraisals or evaluations are not obtained unless the borrower requests a modification or refinance of the loan or there is increased dependence on the value of the collateral because the borrower is in default.

Wesbanco does not maintain current information about the industry in which retail borrowers are employed. While such information is obtained when each loan is underwritten, it often becomes inaccurate with the passage of time as borrowers change employment. Instead, Wesbanco estimates potential exposure based on consumer demographics, market share, and other available information when there is a significant risk of loss of employment within an industry or a significant employer in Wesbanco’s markets. To management’s knowledge, there are no concentrations of employment that would have a material adverse impact on the retail portfolio.

Most retail loans are originated directly by Wesbanco except for indirect consumer loans originated by automobile dealers and other sellers of consumer goods. Wesbanco performs its own customary credit evaluation and underwriting before purchasing indirect loans. The credit risk associated with these loans is similar to that of loans originated by Wesbanco, but additional risk may arise from Wesbanco’s limited ability to control a dealer’s compliance with applicable consumer lending laws. Indirect consumer loans represented $179 million or 58% of consumer loans at December 31, 2020 compared to $223 million or 57% at December 31, 2019.

Loans Held For Sale —Loans held for sale consist of residential real estate loans originated for sale in the secondary market. Credit risk associated with such loans is mitigated by entering into sales commitments with third party investors to purchase the loans when they are originated. This practice has the effect of minimizing the amount of such loans that are unsold and the interest rate risk at any point in time. Wesbanco generally does not service these loans after they are sold. While most loans are sold without recourse, Wesbanco may be required to repurchase loans under certain circumstances for contractual periods of generally up to one year or less. The number and principal balance of loans that Wesbanco has been required to repurchase has not been material and therefore reserves established for this exposure are not material.

Banks that have been acquired by Wesbanco serviced some of the residential real estate loans that were sold to the secondary market prior to being acquired. Although these loans are not carried as an asset on the balance sheet, Wesbanco continues to service these loans. As of December 31, 2020 and 2019, Wesbanco serviced loans for others aggregating approximately $21 million and $175 million, respectively. The unamortized balance of mortgage servicing rights related to these loans is approximately $0.1 million and $0.2 million at December 31, 2020 and 2019, respectively, as mortgage servicing rights from the FFKT acquisition totaling approximately $1.2 million were sold in 2020.

CREDIT QUALITY

The quality of the loan portfolio is measured by various factors, including the amount of loans that are past due, required to be reported as non-performing, or are adversely graded in accordance with internal risk classifications that are consistent with regulatory adverse risk classifications. Non-performing loans consist of non-accrual loans and troubled debt restructurings (“TDRs”). Non-performing assets also include real estate owned (“REO”) and repossessed assets. Net charge-offs are also an important measure of credit quality. Wesbanco seeks to

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develop individual strategies for all assets that have adverse risk characteristics in order to minimize potential loss. However, there is no assurance such strategies will be successful and loans may ultimately proceed to foreclosure or other course of liquidation that does not fully repay the amount of the loan.

Past Due Loans —Loans that are past due but not reported as non-performing generally consist of loans that are between 30 and 89 days contractually past due. Certain loans that are 90 days or more past due also continue to accrue interest because they are deemed to be well-secured and in the process of collection. Earlier stage delinquency requires routine collection efforts to prevent them from becoming more seriously delinquent. Early stage delinquency represents potential future non-performing loans if routine collection efforts are unsuccessful. Table 18 summarizes loans that are contractually past due 30 days or more, excluding non-accrual and TDR loans.

TABLE 18. PAST DUE AND ACCRUING LOANS EXCLUDING NON-ACCRUAL AND TDR LOANS

	December 31,
	2020				2019				2018				2017				2016
(dollars in thousands)	Amount		% of Loan Bal		Amount		% of Loan Bal		Amount		% of Loan Bal		Amount		% of Loan Bal		Amount		% of Loan Bal
90 days or more:
Commercial real estate—    land and construction	$	288		0.04	$	26		—	$	—		—	$	—		—	$	—		—
Commercial real estate—    improved property		2,713		0.05		4,709		0.10		175		0.01		243		0.01		318		0.01
Commercial and industrial		1,899		0.08		1,793		0.11		13		0.00		20		0.00		229		0.02
Residential real estate		2,863		0.17		3,643		0.19		2,820		0.17		1,113		0.08		1,922		0.14
Home equity lines of credit		706		0.11		985		0.15		705		0.12		742		0.14		626		0.12
Consumer		377		0.12		457		0.12		364		0.11		608		0.18		644		0.16
Total 90 days or more		8,846		0.08		11,613		0.11		4,077		0.05		2,726		0.04		3,739		0.06
30 to 89 days:
Commercial real estate—    land and construction		2,858		0.43		650		0.08		1,412		0.27		172		0.04		—		—
Commercial real estate—    improved property		8,948		0.18		15,256		0.31		4,439		0.13		316		0.01		747		0.03
Commercial and industrial		6,540		0.27		5,312		0.32		878		0.07		721		0.06		1,522		0.14
Residential real estate		7,490		0.44		8,183		0.44		6,542		0.41		4,392		0.32		6,080		0.44
Home equity lines of credit		2,754		0.43		3,558		0.55		3,344		0.56		2,281		0.43		2,949		0.58
Consumer		3,006		0.97		3,371		0.90		2,954		0.91		3,290		0.97		4,731		1.19
Total 30 to 89 days		31,596		0.29		36,330		0.35		19,569		0.26		11,172		0.18		16,029		0.26
Total 30 days or more	$	40,442		0.37	$	47,943		0.47	$	23,646		0.31	$	13,898		0.22	$	19,768		0.32

Loans past due 30 days or more and accruing interest and not reported as TDRs decreased $7.5 million, representing 0.37% of total loans at December 31, 2020 as compared to 0.63% at December 31, 2019. The decrease in the 30-89 day category was primarily from the acquired OLBK CRE portfolio as the Bank applied its own collection practices to OLBK’s delinquent loans. The overall low level of delinquency is the result of management’s continued focus on sound initial underwriting, timely collection of loans at their earliest stage of delinquency and fully integrating the acquired OLBK portfolio.

Non-Performing Assets —Non-performing assets consist of non-accrual loans, TDRs, REO and repossessed assets.

Loans are categorized as TDRs when Wesbanco, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider unless the modification results in only an insignificant delay in the payments to be received. Concessions may include a reduction of either the interest rate, the amount of accrued interest, or the principal balance of the loan. Other possible concessions are an interest rate that is less than the market rate for loans with comparable risk characteristics, an extension of the maturity date or an extension of the amortization schedule. Loans reported in this category continue to accrue interest so long as the borrower is able to continue repayment in accordance with the restructured terms. TDRs that are placed on non-accrual are reported in the non-accrual category and not included with accruing TDRs.

Loans are generally placed on non-accrual when they become past due 90 days or more unless they are both well-secured and in the process of collection. Non-accrual loans include certain loans that are also TDRs as set forth in Note 5, “Loans and the Allowance for Credit Losses,” of the Consolidated Financial Statements. Non-accrual loans also include consumer loans that were recently discharged in Chapter 7 bankruptcy but for which the borrower has continued to make payments for less than six consecutive months after the discharge.

57

REO consists primarily of property acquired through or in lieu of foreclosure but may also include bank premises held for sale. Repossessed assets primarily consist of automobiles and other types of collateral acquired to satisfy defaulted consumer loans.  

Table 19 summarizes non-performing assets.

TABLE 19. NON-PERFORMING ASSETS

	December 31,
(dollars in thousands)	2020			2019			2018			2017			2016
TDRs accruing interest:
Commercial real estate—land and construction	$	—		$	—		$	—		$	—		$	—
Commercial real estate—improved property		655			1,321			880			1,650			1,618
Commercial and industrial		111			191			168			128			152
Residential real estate		2,779			3,477			4,185			4,321			5,311
Home equity lines of credit		363			411			426			407			473
Consumer		19			31			85			65			92
Total TDRs accruing interest		3,927			5,431			5,744			6,571			7,646
Non-accrual loans:
Commercial real estate—land and construction		469			580			—			239			766
Commercial real estate—improved property		9,494			6,815			8,413			13,318			9,535
Commercial and industrial		3,302			14,313			3,260			2,958			4,299
Residential real estate		17,925			16,867			13,831			14,661			12,994
Home equity lines of credit		5,345			5,903			4,610			4,762			3,538
Consumer		345			435			586			887			652
Total non-accrual loans		36,880			44,913			30,700			36,825			31,784
Total non-performing loans		40,807			50,344			36,444			43,396			39,430
Real estate owned and repossessed assets		549			4,178			7,265			5,297			8,346
Total non-performing assets	$	41,356		$	54,522		$	43,709		$	48,693		$	47,776
Non-performing loans as a percentage of total portfolio    loans		0.38	%		0.49	%		0.48	%		0.68	%		0.63
Non-performing assets as a percentage of total assets		0.25			0.35			0.35			0.50			0.49
Non-performing assets as a percentage of total portfolio    loans, real estate owned and repossessed assets		0.38			0.53			0.57			0.77			0.76

Accruing TDRs decreased $1.5 million or 27.7% from December 31, 2019 to December 31, 2020. There were no TDRs greater than $1 million or more at December 31, 2020 or 2019. Accruing TDRs are not concentrated in any industry, property or type of loan; however, retail loans represent 80.5% at December 31, 2020, compared to 72.2% December 31, 2019. This includes loans that were discharged in Chapter 7 bankruptcy in the current or prior year; however, the borrower has not yet made payments for at least six consecutive months after the discharge.

Non-accrual loans decreased $8.0 million or 17.9% from December 31, 2019 to December 31, 2020 primarily from one relationship in the manufacturing industry paying off their loans. Approximately $1.8 million or 5.0% of total non-accrual loans at December 31, 2020 also have restructured terms that would require them to be reported as a TDR if they were accruing interest, compared to $1.4 million or 3.2% of the total at December 31, 2019.

Section 4013 of the CARES Act allows financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. These customers must meet certain criteria, such as they were in good standing and not more than 30 days past due as of December 31, 2019, as well as other requirements. Based on this guidance, Wesbanco does not classify the COVID-19 loan modifications as TDRs, nor are the customers considered past due with regard to their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. As of December 31, 2020, Wesbanco has offered three to twelve months of deferred payments to commercial and retail customers impacted by the COVID-19 pandemic, depending on the type of loan and the industry-type for commercial loans.  None of these loans are considered delinquent as of December 31, 2020. Total deferred interest as of December 31, 2020 was $25.6 million, which is located within accrued interest receivable on the balance sheet.  

REO and repossessed assets decreased $3.6 million or 86.9% from December 31, 2019 to December 31, 2020. Wesbanco seeks to minimize the period for which it holds REO and repossessed assets while also attempting to obtain a fair value from their disposition. Therefore, the sales price of these assets is dependent on current market conditions that affect the value of real estate, used automobiles, and other collateral. The average holding period of REO approximated 18 months at December 31, 2020 compared to eight months at December 31, 2019. This longer holding period factors in the complex sale of one commercial property from a prior 2012 acquisition. Repossessed assets are generally sold at auction within 60 days after repossession. Income (expenses) associated with owning REO and repossessed assets charged

58

to other expenses were $0.1 million for 2020 compared to $(0.4) million for 2019. Net gains or losses on the disposition of REO and repossessed assets are credited or charged to non-interest income and approximated $316 thousand of net gains in 2020 and $167 thousand of net gains in 2019.

Criticized and Classified Loans —Please refer to Note 5, “Loans and the Allowance for Credit Losses,” of the Consolidated Financial Statements for a description of internally-assigned risk grades for commercial loans and a summary of loans by grade. Wesbanco’s criticized loans are currently protected, but have weaknesses, which if not corrected, may be inadequately protected at some future date. Classified loan grades are equivalent to the classifications used by banking regulators to identify those loans that have significant adverse characteristics. A classified loan grade is assigned to all non-accrual commercial loans and most commercial TDRs; however, TDRs may be upgraded after the borrower has repaid the loan in accordance with the restructured terms for a period of time, but such loans would generally continue to be reported as TDRs regardless of their grade. Criticized and classified loans totaled $494.9 million or 6.1% of total commercial loans at December 31, 2020, compared to $222.5 million or 3.0% at December 31, 2019. The increase is primarily due to third and fourth quarter net downgrades of $209.9 million of hospitality loans as a result of reduced occupancy and debt service coverage from the current pandemic-driven environment.  

Charge-offs and Recoveries — Total charge-offs decreased $0.1 million or 1.0% to $12.5 million, while total recoveries increased $0.4 million to $5.5 million, resulting in a decrease of $0.5 million in net charge-offs for 2020 compared to 2019. The total net loan charge-off rate of 0.06% of average loans at December 31, 2020, compared to 0.09% at December 31, 2019, is consistent with continued overall low levels of non-performing loans, which were limited due to CARES Act assistance from the SBA’s PPP program and the ability to treat certain loan modifications as non-TDRs during 2020. Table 20 summarizes charge-offs and recoveries as well as net charge-offs as a percentage of average loans for each category of the loan portfolio.

TABLE 20. CHARGE-OFFS AND RECOVERIES

	December 31,
(dollars in thousands)	2020				2019				2018				2017			2016
Charge-offs:
Commercial real estate—land and construction	$	51			$	107			$	137			$	72		$	73
Commercial real estate—improved property		1,747				3,867				1,090				2,381			1,886
Commercial and industrial		3,727				1,816				1,830				2,669			3,070
Residential real estate		1,415				1,276				1,435				1,064			937
Home equity lines of credit		969				1,213				1,193				1,221			397
Consumer		3,615				2,719				3,508				3,989			3,606
Total loan charge-offs		11,524				10,998				9,193				11,396			9,969
Deposit account overdrafts		1,011				1,659				1,374				1,293			884
Total charge-offs		12,535				12,657				10,567				12,689			10,853
Recoveries:
Commercial real estate—land and construction		92				271				409				100			5
Commercial real estate—improved property		796				752				1,293				533			1,543
Commercial and industrial		1,457				1,104				1,100				938			320
Residential real estate		640				365				439				339			445
Home equity lines of credit		501				428				914				230			274
Consumer		1,574				1,743				2,100				1,823			1,485
Total loan recoveries		5,060				4,663				6,255				3,963			4,072
Deposit account overdrafts		426				410				379				353			225
Total recoveries		5,486				5,073				6,634				4,316			4,297
Net charge-offs	$	7,049			$	7,584			$	3,933			$	8,373		$	6,556
Net (recoveries) charge-offs as a percentage of average    loans:
Commercial real estate—land and construction		(0.01	)	%		(0.03	)	%		(0.06	)	%		—	%		0.02
Commercial real estate—improved property		0.02				0.90				(0.01	)			0.08			0.02
Commercial and industrial		0.10				0.05				0.06				0.15			0.31
Residential real estate		0.04				0.06				0.07				0.05			0.04
Home equity lines of credit		0.07				0.13				0.05				0.19			0.03
Consumer		0.60				0.29				0.43				0.60			0.53
Total net loan charge-offs		0.06				0.09				0.06				0.13			0.12

59

ALLOWANCE FOR CREDIT LOSSES

On January 1, 2020, Wesbanco adopted CECL, which resulted in a $41.4 million increase to the allowance for credit losses. Of the $41.4 million, $38.4 million related to the loan portfolio and $3.0 million related to loan commitments. The effect on retained earnings (tax-effected) was $26.6 million.

As of December 31, 2020, the total allowance for credit losses – loans and commitments was $195.3 million of which $185.8 million relates to loans and $9.5 million relates to loan commitments. The allowance for credit losses – loans is 1.72% of total portfolio loans as of December 31, 2020, compared to 0.51% as of December 31, 2019, when the allowance for loan losses (prior to the adoption of CECL) was $52.4 million. Excluding PPP loans of $726.3 million, the allowance for credit losses – loans is 1.85% of total portfolio loans. There is no allowance on PPP loans due to their government guarantee by the SBA.

The allowance for credit losses - loans individually-evaluated increased $6.2 million from December 31, 2019 to December 31, 2020 due to PCD loans acquired from the OLBK acquisition. The allowance for credit losses-loans collectively-evaluated increased from December 31, 2019 to December 31, 2020 by $127.2 million, which includes $31.7 million related to the adoption of CECL as of January 1, 2020.

The allowance for credit losses - loan commitments was $9.5 million at December 31, 2020 as compared to $0.9 million as of December 31, 2019, and is included in other liabilities on the Consolidated Balance Sheets. The allowance for credit losses - loan commitments includes a $3.0 million adjustment related to the adoption of CECL as of January 1, 2020.

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 credit losses in each segment of the portfolio. The allowance for credit losses under CECL is calculated utilizing the PD/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, loan risk grades, portfolio mix, concentrations and loan growth. For the calculation as of December 31, 2020, the forecast was based upon a blend of two nationally-recognized published economic forecasts through December 31, 2020, and is primarily driven by national unemployment and interest rate spread forecasts. Wesbanco’s blended forecast of national unemployment, at year end, was projected to peak at 6.6% in the first quarter of 2021, and subsequently decrease to an average of 6.2% over the remainder of the forecast period. The calculation utilized a one-year reversion period back to the Company’s historical loss rate by loan classification.  Included in the qualitative factors were COVID-19 pandemic factors related to the transient credit risk not covered by the traditional allowance process, adjusted to Wesbanco’s regional footprint, deferred interest on modified loans, and hospitality industry concentration.

If forecasted projections of national unemployment remain consistent with the forecast utilized by Wesbanco as of December 31, 2020 throughout next year, this may result in less significant future quarterly increases in the allowance for credit losses, assuming other model variables remain relatively constant.

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Table 21 summarizes the allowance together with selected relationships of the allowance and provision for credit losses to total loans and certain categories of loans.

TABLE 21. ALLOWANCE FOR CREDIT LOSSES

	December 31,
(dollars in thousands)	2020			2019			2018			2017			2016
Balance at beginning of year:
Allowance for credit losses - loans	$	52,429		$	48,948		$	45,284		$	43,674		$	41,710
Allowance for credit losses - loan commitments		874			741			574			571			613
Total beginning allowance for credit losses - loans and loan commitments		53,303			49,689			45,858			44,245			42,323
Impact of adopting ASC 326		41,442			—			—			—			—
Provision for credit losses:
Provision for loan losses		101,960			11,065			7,597			9,983			8,520
Provision for loan commitments		5,685			133			167			3			(42	)
Total provision for credit losses - loans and loan commitments		107,645			11,198			7,764			9,986			8,478
Net charge-offs:
Total charge-offs		(12,535	)		(12,657	)		(10,567	)		(12,689	)		(10,853	)
Total recoveries		5,486			5,073			6,634			4,316			4,297
Net charge-offs		(7,049	)		(7,584	)		(3,933	)		(8,373	)		(6,556	)
Balance at end of year:
Allowance for credit losses - loans		185,827			52,429			48,948			45,284			43,674
Allowance for credit losses - loan commitments		9,514			874			741			574			571
Total ending allowance for credit losses - loans and loan commitments	$	195,341		$	53,303		$	49,689		$	45,858		$	44,245
Allowance for credit losses - loans as a percentage of total portfolio loans		1.72	%		0.51	%		0.64	%		0.71	%		0.70	%
Allowance for credit losses - loans to non-accrual loans	5.04x			1.17x			1.59x			1.23x			1.37x
Allowance for credit losses - loans to total non-performing loans	4.55x			1.04x			1.34x			1.04x			1.11x
Allowance for credit losses - loans to total non-performing loans    and loans past due 90 days or more	3.74x			0.85x			1.21x			0.98x			1.01x

The allowance consists of specific reserves for certain individually-evaluated loans, if any, and a general reserve for all other loans. Commercial loans, including CRE and C&I, greater than $1 million in balance that are reported as non-accrual, troubled debt restructuring or that have other unique characteristics are tested individually for potential credit losses.  Specific reserves are established when appropriate for such loans based on the net present value of expected future cash flows of the loan or the estimated realizable value of the collateral, if any. The evaluation also considers qualitative factors such as economic trends and conditions, which includes levels of regional unemployment, real estate values and the impact on specific industries and geographical markets, changes in lending policies and underwriting standards, delinquency and other credit quality trends, concentrations of credit risk, if any, the results of internal loan reviews and examinations by bank regulatory agencies pertaining to the allowance for credit losses. As a result of the COVID-19 pandemic, there is concern within the banking industry that deferrals are delaying the overall impact of COVID-19 on the loan portfolio.  As such, temporary COVID-19 qualitative factors have been incorporated to recognize increased risk within the portfolio that is not captured by the quantitative output including COVID-19 pandemic factors related to the transient credit risk not covered by the traditional allowance process, adjusted to Wesbanco’s regional footprint, deferred interest on modified loans, and hospitality industry concentration.

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Table 22 summarizes the components of the allowance.

TABLE 22. COMPONENTS OF THE ALLOWANCE FOR CREDIT LOSSES

	December 31,
(in thousands)	2020		2019		2018		2017		2016
General allowance	$	179,545	$	52,305	$	48,948	$	44,896	$	42,797
Specific reserves		6,282		124		—		388		877
Total allowance for loan losses		185,827		52,429		48,948		45,284		43,674
Allowance for loan commitments		9,514		874		741		574		571
Total allowance for credit losses	$	195,341	$	53,303	$	49,689	$	45,858	$	44,245

The general allowance is comprised of factors based on both historical loss experience and other qualitative factors. The general allowance increased $127.2 million or 243.3% from December 31, 2019 to December 31, 2020 due to the adoption of CECL, changes in macroeconomic factors, changes in portfolio mix and changes in both quantitative and qualitative adjustments. Specific reserves were $6.3 at December 31, 2020, an increase of $6.2 million from December 31, 2019, and the allowance for loan commitments increased $8.6 million from December 31, 2019 to December 31, 2020.

Table 23 summarizes the allocation of the allowance for credit losses to each category of loans.

TABLE 23. ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES

	December 31,
(in thousands)	2020		2019		2018		2017		2016
Allowance for credit losses - loans:
Commercial real estate—land and construction	$	10,841	$	4,949	$	4,039	$	3,117	$	4,348
Commercial real estate—improved property		110,652		20,293		20,848		21,166		18,628
Commercial and industrial		37,850		14,116		12,114		9,414		8,412
Residential real estate		17,851		4,311		3,822		3,206		4,106
Home equity lines of credit		1,487		4,422		4,356		4,497		3,422
Consumer		6,507		2,951		2,797		3,063		3,998
Deposit account overdrafts		639		1,387		972		821		760
Total allowance for credit losses - loans		185,827		52,429		48,948		45,284		43,674
Allowance for credit losses - loan commitments:
Commercial real estate—land and construction		6,508		235		169		119		151
Commercial real estate—improved property		712		22		33		26		17
Commercial and industrial		1,275		311		262		173		188
Residential real estate		955		15		12		7		9
Home equity lines of credit		45		250		226		212		162
Consumer		19		41		39		37		44
Total allowance for credit losses - loan commitments		9,514		874		741		574		571
Total allowance for credit losses	$	195,341	$	53,303	$	49,689	$	45,858	$	44,245

Please refer to Note 5, “Loans and the Allowance for Credit Losses,” of the Consolidated Financial Statements for a summary of changes in the allowance for credit losses applicable to each category of loans. Changes in the allowance for all categories of loans also reflect the net effect of changes in historical loss rates, loan balances, specific reserves and management’s judgment with respect to the impact of qualitative factors on each category of loans. A decrease in the allowance for a particular loan category generally reflects either lower loan balances, historical loss rates or reductions in non-performing and classified commercial loans. Although the allowance for credit losses is allocated as described in Table 23, the total allowance is available to absorb losses in any category of loans. However, differences between management’s estimation of expected future losses and actual incurred losses in subsequent periods may necessitate future adjustments to the provision for credit losses. Management believes the allowance for credit losses is appropriate to absorb expected future losses at December 31, 2020.

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DEPOSITS

TABLE 24. DEPOSITS

	December 31,
(dollars in thousands)	2020		2019		$ Change			% Change
Deposits
Non-interest bearing demand	$	4,070,835	$	3,178,270	$	892,565			28.1
Interest bearing demand		2,839,536		2,316,855		522,681			22.6
Money market		1,685,927		1,518,314		167,613			11.0
Savings deposits		2,214,565		1,934,647		279,918			14.5
Certificates of deposit		1,618,510		2,055,920		(437,410	)		(21.3	)
Total deposits	$	12,429,373	$	11,004,006	$	1,425,367			13.0

Deposits, which represent Wesbanco’s primary source of funds, are offered in various account forms at various rates through Wesbanco’s 233 financial centers, as of December 31, 2020, in West Virginia, Ohio, western Pennsylvania, Maryland, Kentucky, and southern Indiana. The FDIC insures all deposits up to $250,000 per account.

Total deposits increased by $1.4 billion or 13.0% in 2020 primarily due to CARES Act funds received, both consumer stimulus-related and from PPP loan proceeds deposited and increased personal savings. Non-interest bearing demand deposits and interest bearing demand deposits increased 28.1% and 22.6%, respectively, while savings deposits and money market deposits increased 14.5% and 11.0%, respectively, due to the aforementioned CARES Act funds received, focused retail and business strategies to obtain more account relationships and customers’ overall preference for shorter-term maturities. Deposit balances were also somewhat impacted by bonus and royalty payments from Marcellus and Utica shale energy companies in Wesbanco’s southwestern Pennsylvania, eastern Ohio and northern West Virginia markets totaling $65.5 million and $122.7 million for the years ended December 31, 2020 and 2019, respectively. Money market deposits were influenced through Wesbanco’s increased participation in the Insured Cash Sweep (ICS^®) money market deposits program. ICS^® reciprocal balances totaled $513.9 million at December 31, 2020 compared to $232.2 million at December 31, 2019.

Certificates of deposit decreased $437.4 million primarily due to an overall corporate strategy designed to increase and remix retail deposit relationships and reducing single-service customers with a focus on overall products that can be offered at a lower cost to Wesbanco. The decrease was also impacted by lower offered rates on certain maturing certificates of deposit and customer preferences for other non-maturity deposit types. 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 $42.6 million in outstanding balances at December 31, 2020, of which $0.7 million represented one-way buys, compared to $73.3 million in total outstanding balances at December 31, 2019, of which $11.8 million represented one-way buys. Certificates of deposit greater than $250,000 were approximately $381.7 million at December 31, 2020 compared to $524.2 million at December 31, 2019. Certificates of deposit of $100,000 or more were approximately $843.2 million at December 31, 2020 compared to $1.2 billion at December 31, 2019. Certificates of deposit totaling approximately $1.0 billion at December 31, 2020 with a cost of 0.84% are scheduled to mature within the next year. The average rate on certificates of deposit decreased 33 basis points from 1.08% for the year ended December 31, 2019 to 0.75% in 2020, with a similar decrease experienced for jumbo certificates of deposit. Wesbanco will continue to focus on its core deposit strategies and improving its overall mix of transaction accounts to total deposits, which includes offering special promotions on certain certificates of deposit maturities and savings products based on competition, sales strategies, liquidity needs and wholesale borrowing costs.

TABLE 25. MATURITY DISTRIBUTION OF CERTIFICATES OF DEPOSIT OF $100,000 OR MORE

	December 31,
(dollars in thousands)	2020		2019		$ Change			% Change
Maturity:
Within three months	$	187,980	$	248,596	$	(60,616	)		(24.4	)
Over three to six months		158,421		234,321		(75,900	)		(32.4	)
Over six to twelve months		208,401		274,709		(66,308	)		(24.1	)
Over twelve months		288,419		400,545		(112,126	)		(28.0	)
Total certificates of deposit of $100,000 or more	$	843,221	$	1,158,171	$	(314,950	)		(27.2	)

Interest expense on certificates of deposit of $100,000 or more totaled approximately $6.4 million, $8.0 million and $8.3 million in 2020, 2019 and 2018, respectively.

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BORROWINGS

TABLE 26. BORROWINGS

	December 31,
(dollars in thousands)	2020		2019		$ Change			% Change
Federal Home Loan Bank Borrowings	$	549,003	$	1,415,615	$	(866,612	)		(61.2	)
Other short-term borrowings		241,950		282,362		(40,412	)		(14.3	)
Subordinated debt and junior subordinated debt		192,291		199,869		(7,578	)		(3.8	)
Total	$	983,244	$	1,897,846	$	(914,602	)		(48.2	)

Borrowings are a significant source of funding for Wesbanco in addition to deposits. During 2020, FHLB borrowings decreased $866.6 million from December 31, 2019, as $475.0 million in advances were offset by $1.3 billion in maturities and other principal pay downs from available liquidity. The average cost in 2020 of maturing and paid-off FHLB borrowings was 2.03%, compared to the average cost of 1.38% for new FHLB borrowings in 2020.

Wesbanco is a member of the FHLB system. The FHLB system functions as a borrowing source for regulated financial institutions that are engaged in residential and commercial real estate lending along with securities investing. Wesbanco uses term FHLB borrowings as a general funding source and to more appropriately match interest maturities for certain assets. FHLB borrowings are secured by blanket liens on certain residential and other mortgage loans with a market value in excess of the outstanding borrowing balances. The terms of the security agreement with the FHLB include a specific assignment of collateral that requires the maintenance of qualifying mortgage and other types of loans as pledged collateral with unpaid principal amounts in excess of the FHLB advances, when discounted at certain pre-established percentages of the loans’ unpaid balances. FHLB stock, which is recorded at cost of $34.0 million at December 31, 2020, is also pledged as collateral for these advances. Wesbanco’s remaining maximum borrowing capacity, subject to the collateral requirements noted, with the FHLB at December 31, 2020 and 2019 was estimated to be approximately $4.1 billion and $3.2 billion, respectively.

Other short-term borrowings, which may consist of federal funds purchased, callable repurchase agreements, overnight sweep checking accounts and borrowings on a revolving line of credit, decreased $40.4 million to $242.0 million at December 31, 2020, compared to $282.4 million at December 31, 2019. The decrease in these borrowings is primarily due to a $32.9 million decrease in securities sold under agreements to repurchase due to moving certain customer relationships to interest-bearing demand deposits and a $7.5 million decrease in federal funds purchased. At December 31, 2020, there were no outstanding federal funds purchased.

In August 2020, Wesbanco renewed a revolving line of credit, which is a senior obligation of the parent company, with another financial institution. The revolving line of credit, which accrues interest at an adjusted LIBOR rate, provides for aggregate unsecured borrowings of up to $30.0 million. The new revolving line of credit also requires Wesbanco to maintain at all times a consolidated four quarter average return on average assets of > 0.50%, a Texas ratio of less than 25% (broadly defined as the ratio of non-performing assets to tangible common equity and the allowance for loan losses), unencumbered cash and marketable securities of at least $12.0 million, and the maintenance at all times on a consolidated basis and for the Bank a total risk-based capital ratio of > 12.0%, a Tier 1 risk-based capital ratio of > 10.0% and a Tier 1 leverage ratio of > 7.0%. Wesbanco was in compliance with all terms and conditions at December 31, 2020. There was no outstanding balance on the line as of December 31, 2020 or 2019.

CONTRACTUAL OBLIGATIONS

TABLE 27. CONTRACTUAL OBLIGATIONS

			December 31, 2020 (1)
(in thousands)	Footnote Reference		Less than One Year		One to Three Years		Three to Five Years		More Than Five Years		Total
Deposits without a stated maturity	N/A		$	10,810,863	$	—	$	—	$	—	$	10,810,863
Certificates of deposit		9		1,000,380		400,724		159,210		58,196		1,618,510
Federal Home Loan Bank borrowings		10		365,002		183,050		882		69		549,003
Other short term borrowings		10		241,950		—		—		—		241,950
Subordinated debt and junior subordinated debt		11		—		—		25,000		167,291		192,291
Future benefit payments under benefit plans (2)(3)		13		6,703		14,191		15,544		247,362		283,800
Director and executive officer retirement plans (2)	N/A			1,501		2,926		2,173		3,405		10,005
Leases / Right of use assets (2)		6		7,368		12,853		10,588		51,255		82,064
Software licenses and maintenance agreements (2)(4)	N/A			6,216		21,585		21,585		27,880		77,266
Limited partnership funding commitments		8		10,796		8,296		1,016		870		20,978
Total			$	12,450,779	$	643,625	$	235,998	$	556,328	$	13,886,730

(1) Represents maturities of principal and excludes interest payments.

(2) These payments are recognized as expense in the income statement when incurred and not necessarily at the time of payment.

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(3) Pension plan assets of $185.7 million were available at December 31, 2020 to absorb the undiscounted future estimated payments to plan participants in the Wesbanco Defined Benefit Pension Plan of which the discounted benefit obligation is $168.4 million at December 31, 2020. In addition to the Wesbanco Defined Benefit Pension Plan, this includes the FFKT Postretirement Medical Benefit Plan, which has no plan assets.

(4) Software licenses and maintenance agreements included above are not subject to ASC 842, “Leases”. Software licenses and maintenance agreements that are subject to ASC 842 are included in right of use assets on the Consolidated Balance Sheets within premises and equipment.

Significant fixed and determinable contractual obligations as of December 31, 2020 are presented in the table above by due date. The amounts shown do not include future interest payments, accrued interest or other similar carrying value adjustments. Additional information related to each obligation is included in the referenced footnote to the Consolidated Financial Statements.

Wesbanco’s future benefit payments under pension plans are estimated based on actuarial assumptions and do not necessarily represent the actual contractual cash flows that may be required by Wesbanco in the future. Please refer to Note 13, “Employee Benefit Plans,” of the Consolidated Financial Statements for more information on employee benefit plans.

OFF-BALANCE SHEET ARRANGEMENTS

Wesbanco enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, letters of credit, loans approved but not closed, overdraft limits and contingent obligations to purchase loans funded by other entities. Since many of these commitments expire unused or partially used, these commitments may not reflect future cash requirements. Please refer to Note 19, “Commitments and Contingent Liabilities,” of the Consolidated Financial Statements and the “Loans and Loan Commitments” section of this MD&A for additional information.

The allowance for credit losses includes an allowance for unfunded loan commitments.  The allowance for credit losses represents the lifetime expected losses for all loans and unfunded loan commitments at the initial recognition date. The allowance incorporates forward-looking information and applies a reversion methodology beyond the reasonable and supportable forecast. The allowance is increased by a provision charged to operating expense and reduced by charge-offs, net of recoveries, which also includes any necessary adjustments to the reserve for unfunded loan commitments, and such reserve is accounted for in other liabilities. Management evaluates the appropriateness of the allowance at least quarterly.  This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change from period to period. 

During the first quarter of 2020, Wesbanco extended its contract with its existing core service provider for an additional seven years, which includes upgraded and enhanced technological and digital banking services. The new contract also includes additional products and services, which were previously obtained from various other third-party service providers. It is currently anticipated that such core services will be converted in the third quarter of 2021, and that any one-time charges from various contract terminations will be accounted for as of the date of the termination of any such associated contract. In addition to upgrading and enhancing technology, reflecting the current operating environment and increased utilization of digital services, Wesbanco announced, on August 27, 2020, a plan to accelerate its financial center optimization strategy.  This plan consolidates a total of 25 existing locations and converts two others to drive-up only locations across Indiana, Kentucky, Ohio, Pennsylvania, and West Virginia. Three locations closed in 2020 and the remainder closed in January 2021. Gross cost savings of approximately $6.0 million to $6.5 million are expected to be phased-in during the first half of 2021, with approximately half of the gross cost savings reinvested in enhanced customer-facing technologies and digital services. Staff at the locations being consolidated have been permitted to fill certain open positions at other nearby financial centers, somewhat reducing expected cost savings. For the year ended December 31, 2020, Wesbanco incurred $3.3 million in restructuring charges due to the disposition of assets, lease terminations, severance and other costs associated with the closures.

CAPITAL RESOURCES

Shareholders’ equity increased to $2.8 billion at December 31, 2020 from $2.6 billion at December 31, 2019. Wesbanco issued 6.0 million depositary shares, each representing 1/40^th interest in a share of Wesbanco’s 6.75% fixed rate reset non-cumulative perpetual Series A preferred stock with a liquidation preference of $1,000 per share in a registered public offering to both retail and institutional investors. Net proceeds from the transaction after underwriting discounts and offering costs were approximately $144.5 million and are available to support Wesbanco’s obligations, including payments related to outstanding indebtedness, to support the capital needs of the Company and the Bank, and for other general corporate purposes. Additionally, shareholders’ equity was positively impacted by net income during the current year of $122.0 million and a $30.2 million other comprehensive income gain. Such factors were partially offset by the retained earnings effect of the January 1, 2020 CECL adoption totaling $26.6 million, the repurchase of common shares and restricted stock vesting activity totaling $25.3 million, and the declaration of common and preferred shareholder dividends totaling $85.8 million and $2.6 million, respectively, for the year ended December 31, 2020. Other comprehensive income gains for the year ended December 31, 2020 were due to a $28.2 million unrealized gains in the securities portfolio coupled with a $2.0 million unrealized gain in the defined benefit pension plan and other postretirement benefits.

For 2020, common dividends increased to $1.28 per share, or 3.2% on an annualized basis, compared to $1.24 per share in 2019. The common dividend per share payout ratio increased to 72.3% in 2020 from 43.8% in 2019, which is primarily attributable to a decrease in earnings year-over-year. A board-approved policy generally targets dividends as a percent of net income in a range of 35% to 60%, subject to

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capital levels, earnings history and prospects, regulatory concerns, and other factors. The quarterly dividend was increased again in February 2021 to $0.33 per share, or 3.1%.

On December 19, 2019, Wesbanco’s Board of Directors authorized the adoption of a new stock repurchase plan for the purchase of up to an additional 1.7 million shares of Wesbanco common stock, representing approximately 2.5% of the outstanding shares, from time-to-time on the open market, which is in addition to the existing plan approved by the Board of Directors on October 22, 2015. In the first quarter of 2020, Wesbanco purchased 786,010 shares of its outstanding common stock on the open market at a total cost of $25.0 million, or $31.77 before suspending the share buyback program in early March, in an abundance of caution related to the growing COVID-19 pandemic. At December 31, 2020, the remaining shares authorized to be purchased under the current repurchase plans totaled 1,704,457 shares.

Wesbanco is subject to risk-based capital guidelines that measure capital relative to risk-weighted assets and off-balance sheet instruments. Wesbanco and its banking subsidiary Wesbanco Bank maintain Tier 1 risk-based, Total risk-based and Tier 1 leverage capital ratios significantly above minimum regulatory levels. The Bank paid $64.0 million in dividends to Wesbanco during 2020, or 49% of the Bank’s net income. 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 December 31, 2020, under FDIC and State of West Virginia regulations, Wesbanco could receive, without prior regulatory approval, dividends of approximately $306.3 million from the Bank.  The Bank’s policy is generally to declare dividends up to 90% of its earnings to the parent annually, subject to change, with Board approval.

Wesbanco currently has $192.3 million in subordinated debt and junior subordinated debt on its Consolidated Balance Sheet. For regulatory purposes, the junior subordinated debt and trust preferred securities totaling $130.0 million, issued by unconsolidated trust subsidiaries of Wesbanco underlying such junior subordinated debt, are accounted for as Tier 2 capital in accordance with current regulatory reporting requirements. In July 2013, the U.S. federal banking agencies issued a joint final rule that implements the Basel III capital standards effective January 1, 2015 with a phase-in period ending January 1, 2019. The final capital rule establishes the minimum capital levels required under the Dodd-Frank Act, permanently grandfathers trust preferred securities as Tier 1 capital issued before May 19, 2010 for bank holding companies under $15 billion, and increases the capital required for certain categories of assets. Wesbanco had $60.1 million of subordinated debt outstanding at December 31, 2020. YCB, acquired by Wesbanco in 2016 and OLBK, acquired by Wesbanco in 2019, issued $25.0 million and $35.1 million in subordinated debt, respectively. The YCB notes were issued at a fixed rate of 6.25%, mature on December 15, 2025, and became callable on December 15, 2020.  Beginning on the call date, the interest rate became a variable rate equal to 3-month LIBOR plus 4.59% with a current rate of 4.81%. The OLBK notes have a fixed rate of 5.625%, mature on August 15, 2026, and are callable on August 15, 2021. The interest rate will become a variable rate equal to three-month LIBOR plus 4.502% on the call date. The YCB notes are considered Tier 2 regulatory capital for Wesbanco and Wesbanco Bank as they were initially issued by the Bank, while the OLBK notes are considered Tier 2 regulatory capital for Wesbanco.

Please refer to Note 22, “Regulatory Matters,” of the Consolidated Financial Statements for more information on capital amounts, ratios and minimum regulatory requirements. Also refer to “Item 1. Business” within this Annual Report on Form 10-K for more information on the Dodd-Frank Wall Street Reform and Consumer Protection Act and Basel III Capital Standards.

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”).

Wesbanco determines the degree of required liquidity by the relationship of total holdings of liquid assets to the possible need for funds 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 Wesbanco’s investment portfolio management. 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 64.6% and deposit balances funded 75.7% of total assets at December 31, 2020.

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The following table lists the sources of liquidity from assets at December 31, 2020 expected within the next year:

(in thousands)
Cash and cash equivalents	$	905,477
Securities with a maturity date within the next year and callable securities		286,304
Projected payments and prepayments on mortgage-backed securities and collateralized    mortgage obligations (1)		739,468
Loans held for sale		168,378
Accruing loans scheduled to mature		1,272,232
Normal loan repayments		2,693,036
Total sources of liquidity expected within the next year	$	6,064,895

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

Deposit flows are another principal factor affecting overall Wesbanco liquidity. Deposits totaled $12.4 billion at December 31, 2020. Deposit 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 $1.0 billion at December 31, 2020, which includes jumbo regular certificates of deposit totaling $522.5 million with a weighted-average cost of 1.00%, and jumbo CDARS^® deposits of $32.3 million with a weighted-average cost of 0.57%.

Wesbanco maintains a line of credit with the FHLB as an additional funding source. Available credit with the FHLB at December 31, 2020 approximated $4.1 billion, compared to $3.2 billion at December 31, 2019. 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 otherwise unpledged securities. At December 31, 2020, the Bank had unpledged available-for-sale securities with an amortized cost of $332.9 million. A portion of these securities could be sold for additional liquidity, or such securities could be pledged to secure additional FHLB borrowings. Available liquidity through the sale of investment securities is somewhat limited, as approximately 17.8% of the current available-for-sale portfolio balance is unpledged, due to the pledging agreements that Wesbanco has with their public deposit customers. Public deposit balances have increased significantly through the several acquisitions made since 2015. Wesbanco’s held-to-maturity portfolio currently contains $544.2 million of unpledged securities. Most of these securities are tax-exempt municipal securities, which can only be pledged in limited circumstances. In addition, except for certain limited, special circumstances, 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 utilize for some time.

Wesbanco participates in the Federal Reserve Bank’s Borrower-in-Custody Program (“BIC”), whereby Wesbanco pledges certain consumer loans as collateral for borrowings. At December 31, 2020, Wesbanco had a BIC line of credit totaling $186.6 million, none of which was outstanding. Alternative funding sources may include the utilization of existing overnight lines of credit with third-party banks totaling $275.0 million, none of which was outstanding at December 31, 2020, 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 $242.0 million at December 31, 2020 consisted of callable repurchase agreements and overnight sweep checking accounts for commercial customers. There has been an increase of $24.0 million in the average deposit balances of overnight sweep checking accounts during 2020 primarily from the OLBK acquisition. 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, $223.2 million in cash on hand, and a $30.0 million revolving line of credit with another bank, which did not have an outstanding balance at December 31, 2020. Wesbanco is in compliance with all loan covenants. 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 December 31, 2020, under FDIC and State of West Virginia regulations, Wesbanco could receive, without prior regulatory approval, dividends of approximately $306.3 million from the Bank. Management believes these are appropriate levels of cash for Wesbanco 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 $3.0 billion and $3.3 billion at December 31, 2020 and 2019, respectively. On a historical basis, only a small portion of these commitments will result in an outflow of funds. Please refer to Note 19, “Commitments and Contingent Liabilities,” of the Consolidated Financial Statements and the “Loans and Loan Commitments” section of this MD&A for additional information.

Federal financial regulatory agencies previously have 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 as of December 31, 2020 and that Wesbanco’s current liquidity risk management policies and procedures adequately address this guidance.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 is to maximize net interest income within established policy parameters. This objective is accomplished through the management of balance sheet composition, market risk exposures arising from changing economic conditions and 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 interest rate risk.  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, or because variable rate assets and liabilities differ in the timing and/or the percentage of rate changes.

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-at-risk models. These models are highly dependent on various assumptions, which change regularly as the balance sheet and market interest rates change. The key assumptions and strategies employed are analyzed, reviewed and documented at least quarterly by the ALCO.

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 Bank- specific data, current market rates and economic forecasts, and are internally back-tested and periodically reviewed by a third-party consultant. 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 and also assumes that a particular change in interest rates is reflected uniformly across 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.  In addition, this analysis does not consider actions that management might employ 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 - 300 basis points across the entire yield curve, as compared to a stable 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% - 15%, 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 December 31, 2020 and December 31, 2019, assuming the above-noted interest rate increases, as compared to a base model.  In the current interest rate environment, particularly for short-term rates, the 100 – 300 basis points decreasing changes for December 31, 2020 and the 200 – 300 basis points decreasing changes for December 31, 2019 are not shown due to the unrealistic and/or negative yield nature of the results.

TABLE 1. NET INTEREST INCOME SENSITIVITY

Immediate Change in Interest	Percentage Change in Net Interest Income from Base over One Year		ALCO
Rates (basis points)	December 31, 2020	December 31, 2019	Guidelines
+300	15.3%	5.6%	(15.0%)
+200	10.3%	3.9%	(10.0%)
+100	5.5%	2.2%	(7.5%)
-100	N/A	(4.2%)	(7.5%)

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Adjustments to relative sensitivities are due to the impact of the current lower rate and yield curve environment on base case net interest income and the related calculation of 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 adjustments for various modeling assumptions. Generally, deposit betas utilized in modeling are estimated at more conservative percentages for both up and down rate scenarios than has been the Bank’s historical experience, as a result of both competitive factors in our markets and as public funds and institutional contract terms are renewed. Deposit betas, decay rates and loan prepayment speeds are adjusted periodically 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, 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.  

In addition to the aforementioned parallel rate shock earnings sensitivity simulation model, the ALCO also reviews a “dynamic” forecast scenario to project 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 rates for various maturities, competitive market spreads for various products and other assumptions. 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 economic value of equity (“EVE”), which is defined as the market value of tangible equity in various rate scenarios.  Generally, changes in the economic value of equity 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 December 31, 2020 and December 31, 2019. Changes in EVE sensitivity since year-end 2019 relate to the significant decrease in market interest rates, particularly in the latter half of the first quarter of 2020, and their impact upon the fair values of earning assets and costing liabilities:

Immediate Change in Interest	Percentage Change in Economic Value of Equity from Base over One Year		ALCO
Rates (basis points)	December 31, 2020	December 31, 2019	Guidelines
+300	13.4%	2.6%	(30.0%)
+200	10.6%	3.4%	(20.0%)
+100	7.1%	4.1%	(10.0%)
-100	N/A	(5.4%)	(10.0%)

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.  

Management is aware of the significant effect that inflation or deflation has upon interest rates and ultimately upon financial performance.  Wesbanco’s ability to cope with inflation or deflation is best determined by analyzing its capability to respond to changing market interest rates, as well as its ability to manage the various elements of non-interest income and expense during periods of increasing or decreasing inflation or deflation. Wesbanco monitors the level and mix of interest-rate sensitive assets and liabilities through ALCO in order to reduce the impact of inflation or deflation on net interest income.  Management also controls the effects of inflation or deflation by conducting periodic reviews of the prices, costs and terms of its various products and services, as well as competitive factors, by approving new products and services or adjusting the terms and availability of existing products and services.

In anticipation of the potential discontinuance of the London Interbank Offered Rate (“LIBOR”) at the end of 2021, Wesbanco has created a LIBOR transition committee consisting of members from treasury, commercial Lending, operations, accounting, and legal counsel, that is responsible for investigating and mitigating the risk associated with the transition away from LIBOR. The Committee has divided the Company’s transition efforts into two phases. The first phase addressed immediate concerns regarding new loan originations and included

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adding additional language to new loans that allows Wesbanco to replace LIBOR with an equivalent rate index and adjust the margin to ensure the resulting all-in interest rate is the same as it previously was using LIBOR. Also included in the first phase was Wesbanco transitioning from the LIBOR swap curve to treasury rates when repricing certain loans and originating new loans. At a future date, Wesbanco will begin to price new floating rate loans to a suitable LIBOR replacement. Wesbanco continues to investigate replacement candidates including the Secured Overnight Financing Rate (“SOFR”), the Ameribor Unsecured Overnight Rate (“AMERIBOR”) and versions thereof. The second phase is transitioning current variable loans tied to LIBOR or on a LIBOR swap curve. Wesbanco is tracking the dollar amount and number of loans tied to LIBOR or the LIBOR swap curve and engaging its legal counsel and primary regulators to ensure the smooth transition away from LIBOR. Additionally, Wesbanco is closely monitoring industry developments including the amendments to the 2006 International Swaps and Derivatives Association (“ISDA”) Master Agreement, the related LIBOR Fallback protocol, Bloomberg’s Fallback Rate SOFR, and recent considerations to delay the cessation of certain LIBOR tenors, including one-month LIBOR, until June 30, 2023.

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Wesbanco is responsible for establishing and maintaining adequate internal control over financial reporting. Wesbanco’s internal control over financial reporting is a process designed under the supervision of Wesbanco’s chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Wesbanco’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Wesbanco’s management assessed the effectiveness of Wesbanco’s internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).  Based on the assessment, management determined that, as of December 31, 2020, Wesbanco’s internal control over financial reporting is effective, based on the COSO criteria. The effectiveness of Wesbanco’s internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, Wesbanco’s independent registered public accounting firm, as stated in their attestation report appearing below.

/s/ Todd F. Clossin	/s/ Robert H. Young
Todd F. Clossin	Robert H. Young
President and Chief Executive Officer	Senior Executive Vice President and Chief Financial Officer

71

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Wesbanco, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Wesbanco, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wesbanco, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Pittsburgh, Pennsylvania

February 26, 2021

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Wesbanco, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Wesbanco, Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Notes 1 and 5 to the consolidated financial statements, the Company changed its method for accounting for credit losses in 2020 due to the adoption of ASU 2016-13 (Topic 326), Measurement of Credit Losses on Financial Instruments. As explained below, auditing the Company’s allowance for credit losses (ACL), including adoption of the new accounting guidance, was a critical audit matter.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Allowance for Credit Losses

Description of the Matter

On January 1, 2020, the Company adopted ASU 2016-13 (Topic 326), Measurement of Credit Losses on Financial Instruments, which resulted in an increase to the ACL of $41.4 million.  The Company’s loan portfolio totaled $10.8 billion as of December 31, 2020 and the associated ACL was $185.8 million. As discussed in Note 1 and 5 to the consolidated financial statements, the ACL reflects the lifetime expected losses on the Company’s loan portfolio, including unfunded commitments.  The ACL is calculated utilizing the probability of default / loss given default approach to calculate the expected loss for each segment, which is then discounted to net present value. 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, loan risk grades, portfolio mix, concentrations and loan growth.  The evaluation also considers qualitative factors such as economic trends and conditions.   Auditing management’s ACL estimate and related provision for credit losses was complex due to the expected loss models used to compute the quantitative reserve and involves a high degree of subjectivity due to the judgment required in evaluating management’s determination of the qualitative factors described above.

73

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over the ACL process, including controls over the appropriateness over the ACL methodology, the expected loss models, the reliability and accuracy of data used in developing the ACL estimate, and management’s review and approval process over the forecast, qualitative adjustments and overall ACL results. With the assistance of EY specialists, we tested management’s expected loss models including evaluating the conceptual soundness of model methodology, assessing model performance and governance, testing key model assumptions, including the reasonable and supportable forecast period, and independently recalculating model output.  We also compared the underlying economic forecast data used to estimate the quantitative reserve to external sources to determine whether it was complete and accurate. To test the qualitative factor adjustments, among other procedures, we assessed management’s methodology and considered whether relevant risks were reflected in the models and whether adjustments to the model output were appropriate.  We tested the completeness, accuracy, and relevance of the underlying data used to estimate the qualitative adjustments.  We evaluated whether qualitative adjustments were reasonable based on changes in economic conditions and the loan portfolio.  For example, we evaluated the reasonableness of qualitative adjustments for economic trends and conditions by independently comparing loan portfolio information.  We also assessed whether qualitative adjustments were consistent with publicly available information (e.g. macroeconomic data).  Further, we performed an independent search for the existence of new or contrary information relating to risks impacting the qualitative factor adjustments to validate that management’s considerations are appropriate.  Additionally, we evaluated whether the overall ACL, inclusive of qualitative factor adjustments, appropriately reflects losses expected in the loan portfolio by comparing to historical losses and peer bank data.

We have served as the Company’s auditor since 1996.

Pittsburgh, Pennsylvania

February 26, 2021

74

WESBANCO, INC. CONSOLIDATED BALANCE SHEETS

	December 31,
(in thousands, except shares)	2020			2019
ASSETS
Cash and due from banks, including interest bearing amounts of $721,086 and $51,891,    respectively	$	905,447		$	234,796
Securities:
Equity securities, at fair value		13,047			12,343
Available-for-sale debt securities, at fair value		1,978,136			2,393,558
Held-to-maturity debt securities (fair values of $768,183 and $874,523, respectively)		731,212			851,753
Allowance for credit losses, held-to-maturity debt securities		(326	)		—
Net held-to-maturity debt securities		730,886			851,753
Total securities		2,722,069			3,257,654
Loans held for sale		168,378			43,013
Portfolio loans, net of unearned income		10,789,233			10,267,985
Allowance for credit losses - loans		(185,827	)		(52,429	)
Net portfolio loans		10,603,406			10,215,556
Premises and equipment, net		249,421			261,014
Accrued interest receivable		66,790			43,648
Goodwill and other intangible assets, net		1,163,091			1,149,153
Bank-owned life insurance		306,038			299,516
Other assets		240,970			215,762
Total Assets	$	16,425,610		$	15,720,112
LIABILITIES
Deposits:
Non-interest bearing demand	$	4,070,835		$	3,178,270
Interest bearing demand		2,839,536			2,316,855
Money market		1,685,927			1,518,314
Savings deposits		2,214,565			1,934,647
Certificates of deposit		1,618,510			2,055,920
Total deposits		12,429,373			11,004,006
Federal Home Loan Bank borrowings		549,003			1,415,615
Other short-term borrowings		241,950			282,362
Subordinated debt and junior subordinated debt		192,291			199,869
Total borrowings		983,244			1,897,846
Accrued interest payable		4,314			8,077
Other liabilities		251,942			216,262
Total Liabilities		13,668,873			13,126,191
SHAREHOLDERS’ EQUITY
Preferred stock, no par value; 1,000,000 shares authorized in 2020 and 2019, respectively; 150,000 shares 6.75% non-cumulative perpetual preferred stock, Series A, liquidation preference $150,000,000, issued and outstanding at December 31, 2020 and 0 shares issued and outstanding at December 31, 2019, respectively		144,484			—
Common stock, $2.0833 par value; 100,000,000 shares authorized; 68,081,306 and 68,078,116 shares issued in 2020 and 2019, respectively; 67,254,706 and 67,824,428 shares outstanding in 2020 and 2019, respectively		141,834			141,827
Capital surplus		1,634,815			1,636,966
Retained earnings		831,688			824,694
Treasury stock (826,600 and 253,688 shares in 2020 and 2019, respectively, at cost)		(25,949	)		(9,463	)
Accumulated other comprehensive income		31,359			1,201
Deferred benefits for directors		(1,494	)		(1,304	)
Total Shareholders’ Equity		2,756,737			2,593,921
Total Liabilities and Shareholders’ Equity	$	16,425,610		$	15,720,112

See Notes to Consolidated Financial Statements.

75

WESBANCO, INC. CONSOLIDATED STATEMENTS OF INCOME

	For the Years Ended December 31,
(in thousands, except shares and per share amounts)	2020		2019		2018
INTEREST AND DIVIDEND INCOME
Loans, including fees	$	465,677	$	393,166	$	331,961
Interest and dividends on securities:
Taxable		53,594		65,648		56,898
Tax-exempt		16,999		20,006		20,778
Total interest and dividends on securities		70,593		85,654		77,676
Other interest income		5,007		5,433		5,320
Total interest and dividend income		541,277		484,253		414,957
INTEREST EXPENSE
Interest bearing demand deposits		7,069		16,805		13,144
Money market deposits		4,616		8,024		5,016
Savings deposits		1,802		2,995		1,225
Certificates of deposit		13,562		15,631		12,450
Total interest expense on deposits		27,049		43,455		31,835
Federal Home Loan Bank borrowings		24,701		26,548		23,333
Other short-term borrowings		1,729		5,401		3,717
Subordinated debt and junior subordinated debt		8,318		8,945		8,836
Total interest expense		61,797		84,349		67,721
NET INTEREST INCOME		479,480		399,904		347,236
Provision for credit losses		107,741		11,198		7,764
Net interest income after provision for credit losses		371,739		388,706		339,472
NON-INTEREST INCOME
Trust fees		26,335		26,579		24,623
Service charges on deposits		21,943		26,974		23,670
Electronic banking fees		17,524		22,634		23,300
Net securities brokerage revenue		6,189		6,990		7,186
Bank-owned life insurance		7,359		5,913		6,427
Mortgage banking income		22,736		8,219		5,840
Net securities gains (losses)		4,268		4,320		(900	)
Net gains on other real estate owned and other assets		103		732		524
Other income		21,728		14,355		9,606
Total non-interest income		128,185		116,716		100,276
NON-INTEREST EXPENSE
Salaries and wages		153,166		132,485		114,602
Employee benefits		41,723		39,313		30,079
Net occupancy		27,580		22,505		19,165
Equipment		24,801		20,494		17,207
Marketing		5,957		6,062		5,368
FDIC insurance		7,734		1,956		3,242
Amortization of intangible assets		13,411		10,340		6,980
Restructuring and merger-related expense		9,725		16,397		17,860
Other operating expenses		70,748		62,656		50,721
Total non-interest expense		354,845		312,208		265,224
Income before provision for income taxes		145,079		193,214		174,524
Provision for income taxes		23,035		34,341		31,412
NET INCOME	$	122,044	$	158,873	$	143,112
Preferred stock dividends		2,644		—		—
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	119,400	$	158,873	$	143,112
EARNINGS PER COMMON SHARE
Basic	$	1.78	$	2.83	$	2.93
Diluted		1.77		2.83		2.92
AVERAGE COMMON SHARES OUTSTANDING
Basic		67,260,796		56,108,084		48,889,041
Diluted		67,310,584		56,214,364		49,022,990
DIVIDENDS DECLARED PER COMMON SHARE	$	1.28	$	1.24	$	1.16

See Notes to Consolidated Financial Statements.

76

WESBANCO, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	For the Years Ended December 31,
(in thousands)	2020			2019			2018
Net income	$	122,044		$	158,873		$	143,112
Debt securities available-for-sale:
Net change in unrealized gains (losses) on debt securities available-for-sale		39,880			52,299			(9,228	)
Related income tax (expense) benefit		(9,727	)		(11,958	)		2,008
Net securities (gains) losses reclassified into earnings		(2,540	)		(227	)		15
Related income tax expense (benefit)		604			52			(4	)
Net effect on other comprehensive income for the period		28,217			40,166			(7,209	)
Debt securities held-to-maturity:
Amortization of unrealized gain transferred from debt securities    available-for-sale		(32	)		(222	)		(244	)
Related income tax expense		7			54			56
Net effect on other comprehensive income for the period		(25	)		(168	)		(188	)
Defined benefit plans:
Amortization of net loss and prior service costs		3,000			3,042			2,948
Related income tax benefit		(714	)		(729	)		(822	)
Recognition of unrealized loss		(420	)		(4,250	)		(54	)
Related income tax benefit		100			1,011			12
Net effect on other comprehensive income for the period		1,966			(926	)		2,084
Total other comprehensive gain (loss)		30,158			39,072			(5,313	)
Comprehensive income	$	152,202		$	197,945		$	137,799

See Notes to Consolidated Financial Statements.

77

WESBANCO, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

			For the years ended December 31, 2020, 2019, and 2018
	Preferred		Common Stock														Accumulated Other			Deferred Benefits
(in thousands, except shares and per share amounts)	Stock Amount		Shares Outstanding			Amount		Capital Surplus			Retained Earnings			Treasury Stock			Comprehensive Gain (Loss)			for Directors			Total
January 1, 2018	$	—		44,043,244		$	91,756	$	684,730		$	651,357		$	—		$	(31,495	)	$	(1,027	)	$	1,395,321
Net income		—		—			—		—			143,112			—			—			—			143,112
Other comprehensive loss		—		—			—		—			—			—			(5,313	)		—			(5,313	)
Comprehensive income																								137,799
Common dividends declared ($1.16 per share)		—		—			—		—			(57,951	)		—			—			—			(57,951	)
Adoption of ASU 2016-01		—		—			—		—			1,063			—			(1,063	)		—			—
Shares issued for FTSB acquisition		—		2,498,761			5,206		102,141			—			—			—			—			107,347
Shares issued for FFKT acquisition		—		7,920,387			16,487		374,464			—			316			—			—			391,267
Treasury shares acquired		—		(21,322	)		-		292			—			(989	)		—			—			(697	)
Stock options exercised		—		58,763			104		1,346			—			399			—			—			1,849
Restricted stock granted		—		98,301			205		(205	)		—			—			—			—			—
Stock compensation expense		—		—			—		4,361			—			—			—			—			4,361
Deferred benefits for directors—net		—		—			—		(428	)		—			—			—			(41	)		(469	)
December 31, 2018	$	—		54,598,134		$	113,758	$	1,166,701		$	737,581		$	(274	)	$	(37,871	)	$	(1,068	)	$	1,978,827
Net income		—		—			—		—			158,873			—			—			—			158,873
Other comprehensive income		—		—			—		—			—			—			39,072			—			39,072
Comprehensive income																								197,945
Common dividends declared ($1.24 per share)		—		—			—		—			(71,760	)		—			—			—			(71,760	)
Shares issued for OLBK acquisition		—		13,351,837			27,815		466,120			—			—			—			—			493,935
Treasury shares acquired		—		(281,365	)		—		181			—			(10,479	)		—			—			(10,298	)
Stock options exercised		—		7,375			8		—			—			151			—			—			159
Restricted stock granted		—		148,447			246		(1,385	)		—			1,139			—			—			—
Stock compensation expense		—		—			—		5,321			—			—			—			—			5,321
Deferred benefits for directors—net		—		—			—		28			—			—			—			(236	)		(208	)
December 31, 2019	$	—		67,824,428		$	141,827	$	1,636,966		$	824,694		$	(9,463	)	$	1,201		$	(1,304	)	$	2,593,921
Net income		—		—			—		—			122,044			—			—			—			122,044
Other comprehensive income		—		—			—		—			—			—			30,158			—			30,158
Comprehensive income																								152,202
Common dividends declared ($1.28 per share)		—		—			—		—			(85,815	)		—			—			—			(85,815	)
Preferred dividends declared ($17.625 per share)		—		—			—		—			(2,644	)		—			—			—			(2,644	)
Adoption of ASU 2016-13		—		—			—		—			(26,591	)		—			—			—			(26,591	)
Issuance of preferred stock, net of issuance costs		144,484		—			—		—			—			—			—			—			144,484
Treasury shares acquired		—		(813,108	)		—		118			—			(25,414	)		—			—			(25,296	)
Stock options exercised		—		61,623			7		(1,206	)		—			2,175			—			—			976
Restricted stock granted		—		181,763			—		(6,753	)		—			6,753			—			—			—
Stock compensation expense		—		—			—		5,653			—			—			—			—			5,653
Deferred benefits for directors—net		—		—			—		37			—			—			—			(190	)		(153	)
December 31, 2020	$	144,484		67,254,706		$	141,834	$	1,634,815		$	831,688		$	(25,949	)	$	31,359		$	(1,494	)	$	2,756,737

See Notes to Consolidated Financial Statements.

78

WESBANCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
(in thousands)	2020			2019			2018
OPERATING ACTIVITIES
Net income	$	122,044		$	158,873		$	143,112
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment		14,131			11,567			10,451
Other net (accretion) amortization		(9,890	)		996			3,932
Provision for credit losses		107,741			11,198			7,764
Net securities (gains) losses		(4,268	)		(4,320	)		900
Mortgage banking income		(22,736	)		(8,219	)		(5,840	)
Stock compensation expense		5,653			5,321			4,361
(Increase) decrease in deferred income tax assets, net		(10,518	)		8,466			7,163
Increase in cash surrender value of bank-owned life insurance		(7,359	)		(5,913	)		(6,427	)
Contribution to pension plan		—			(3,000	)		(2,700	)
Loans originated for sale		(910,155	)		(328,319	)		(215,540	)
Proceeds from the sale of loans originated for sale		786,352			308,856			227,100
Net change in equity securities		344			(104	)		(700	)
Net change in: accrued interest receivable and other assets		(30,280	)		(33,400	)		19,895
Net change in: accrued interest payable and other liabilities		16,189			41,500			(1,347	)
Other—net		2,358			(139	)		(233	)
Net cash provided by operating activities		59,606			163,363			191,891
INVESTING ACTIVITIES
Net (increase) decrease in loans held for investment		(538,688	)		(61,804	)		121,504
Available-for-sale debt securities:
Proceeds from sales		226,099			125,839			82,134
Proceeds from maturities, prepayments and calls		803,006			438,259			267,936
Purchases of securities		(585,930	)		(573,729	)		(841,696	)
Held-to-maturity debt securities:
Proceeds from maturities, prepayments and calls		200,100			163,667			78,938
Purchases of securities		(82,695	)		(41,516	)		(89,933	)
Equity securities:
Proceeds from sales		203			4,090			1,511
Net cash received from business acquisitions		—			60,025			278,654
Proceeds from bank owned life insurance		832			1,156			4,772
Purchases of premises and equipment—net		(7,551	)		(12,201	)		(4,669	)
Sale of portfolio loans		42,416			—			48,990
Net cash provided by (used in) investing activities		57,792			103,786			(51,859	)
FINANCING ACTIVITIES
Increase (decrease) in deposits		1,435,497			(199,771	)		(129,878	)
Proceeds from Federal Home Loan Bank borrowings		475,000			1,035,000			640,000
Repayment of Federal Home Loan Bank borrowings		(1,341,814	)		(888,862	)		(589,546	)
(Decrease) increase in other short-term borrowings		(32,912	)		(44,788	)		86,284
Principal repayments of finance lease obligations		(422	)		(402	)		(334	)
(Decrease) increase in federal funds purchased		(7,500	)		7,500			(25,000	)
Repayment of junior subordinated debt		(6,702	)		(33,506	)		(17,519	)
Dividends paid to common shareholders		(85,253	)		(66,571	)		(53,577	)
Dividends paid to preferred shareholders		(2,644	)		—			—
Issuance of common stock		59			72			1,578
Issuance of preferred stock, net of issuance costs		144,484			—			—
Treasury shares purchased—net		(24,540	)		(10,211	)		(426	)
Net cash provided by (used in) financing activities		553,253			(201,539	)		(88,418	)
Net increase in cash, cash equivalents and restricted cash		670,651			65,610			51,614
Cash, cash equivalents and restricted cash at beginning of the year		234,796			169,186			117,572
Cash, cash equivalents and restricted cash at end of the year	$	905,447		$	234,796		$	169,186
SUPPLEMENTAL DISCLOSURES
Interest paid on deposits and other borrowings	$	75,082		$	87,145		$	68,618
Income taxes paid		36,975			31,375			18,700
Transfers of loans to other real estate owned		263			1,015			1,275
Transfers of portfolio loans to loans held for sale		42,416			—			48,990
Non-cash transactions related to OLBK, FFKT and FTSB acquisitions		—			493,935			498,614
Transfers of held-to-maturity debt securities to available-for-sale debt securities		—			67,393			—
Right of use assets obtained in exchange for lease obligations		—			19,827			—

See Notes to Consolidated Financial Statements.

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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations— Wesbanco, Inc. (“Wesbanco” or the “Company”) is a bank holding company offering a full range of financial services, including trust and investment services, mortgage banking, insurance and brokerage services. Wesbanco’s defined business segments are community banking and trust and investment services. As of December 31, 2020, Wesbanco’s banking subsidiary, Wesbanco Bank, Inc. (“Wesbanco Bank” or the “Bank”), headquartered in Wheeling, West Virginia, operates through 233 branches and 226 ATM machines in West Virginia, Ohio, western Pennsylvania, Kentucky, southern Indiana and Maryland. In addition, Wesbanco operates an insurance brokerage company, Wesbanco Insurance Services, Inc., and a full service broker/dealer, Wesbanco Securities, Inc.

Use of Estimates— The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation— The Consolidated Financial Statements include the accounts of Wesbanco and those entities in which Wesbanco has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation.

Wesbanco determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity. A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make financial and operating decisions. Wesbanco consolidates voting interest entities in which it owns all, or at least a majority (generally, greater than 50%) of the voting interest.

Business Combinations— Business combinations are accounted for by applying the acquisition method. As of acquisition date, the identifiable assets acquired and liabilities assumed are measured at fair value and recognized separately from goodwill. Results of operations of the acquired entities are included in the consolidated statement of income from the date of acquisition.

Variable Interest Entities— Variable interest entities (“VIE”) are entities that in general either do not have equity investors with voting rights or that have equity investors that do not provide sufficient financial resources for the entity to support its activities. Wesbanco uses VIEs in various legal forms to conduct normal business activities. Wesbanco reviews the structure and activities of VIEs for possible consolidation.

A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits of the VIE that could potentially be significant to the VIE. A VIE often holds financial assets, including loans or receivables, real estate or other property. The company with a controlling financial interest, known as the primary beneficiary, is required to consolidate the VIE. Wesbanco has eleven wholly-owned trust subsidiaries (collectively, the “Trusts”), for which it does not have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance nor the obligation to absorb losses or the right to receive a benefits from the VIE that could be potentially significant to the VIE. Accordingly, the Trusts and their net assets are not included in the Consolidated Financial Statements. However, the junior subordinated deferrable interest debentures issued by Wesbanco to the Trusts (refer to Note 11, “Subordinated Debt and Junior Subordinated Debt”) and the common stock issued by the Trusts is included in the Consolidated Balance Sheets. Wesbanco also owns non-controlling variable interests in certain limited partnerships for which it does not have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance nor the obligation to absorb losses or the right to receive a benefit from the VIE that could be potentially significant to the VIE. These VIEs are not consolidated into Wesbanco’s financial statements because Wesbanco is not considered the primary beneficiary. These investments are accounted for using the equity method of accounting and are included in other assets in the Consolidated Balance Sheets. Refer to Note 8, “Investments in Limited Partnerships” for further detail.

Revenue Recognition— Interest and dividend income, loan fees, trust fees, fees and charges on deposit accounts, insurance commissions and other ancillary income related to the Bank’s deposits, lending and other activities, as well as income at Wesbanco’s other subsidiary companies, are accrued as contractually earned. Refer to Note 14, “Revenue Recognition” for further detail.

Cash and Cash Equivalents— Cash and cash equivalents include cash and due from banks, due from banks – interest bearing and federal funds sold. Generally, federal funds are sold for one-day periods.

Securities— Equity securities: Equity securities, which include investments in various mutual funds held in grantor trusts formed in connection with the Company’s deferred compensation plan, are reported at fair value with the gains and losses included in non-interest income.

Available-for-sale debt securities: Debt securities not classified as held-to-maturity are classified as available-for-sale. These securities may be sold at any time based upon management’s assessment of changes in economic or financial market conditions, interest rate or prepayment risks, liquidity considerations and other factors. These securities are stated at fair value, with the fair value adjustment, net of tax, reported as a separate component of accumulated other comprehensive income.

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Held-to-maturity debt securities: Securities that are purchased with the positive intent and ability to be held until their maturity are stated at cost and adjusted for amortization of premiums and accretion of discounts. Transfers of debt securities into the held-to-maturity category from the available-for-sale category are made at fair value at the date of transfer. The unrealized gain or loss at the date of transfer is retained in other comprehensive income and in the carrying value of the held-to-maturity securities. Such amounts are amortized over the remaining life of the security. Certain securities with less than 15% of their original purchase price remaining or that have experienced measurable credit deterioration may be sold.

Cost method investments: Securities that do not have readily determinable fair values and for which Wesbanco does not exercise significant influence are carried at cost. Cost method investments consist primarily of Federal Home Loan Bank (“FHLB”) stock and are included in other assets in the Consolidated Balance Sheets. Cost method investments are evaluated for impairment whenever events or circumstances suggest that their carrying value may not be recoverable.

Securities acquired in acquisitions are recorded at fair value with the premium or discount derived from the fair market value adjustment recognized into interest income on a level yield basis over the remaining life of the security.

Gains and losses: Net realized gains and losses on sales of securities are included in non-interest income. The cost of securities sold is based on the specific identification method. The gain or loss is determined as of the trade date. Unrealized gains and losses on available-for-sale securities are recorded through other comprehensive income.

Amortization and accretion: Generally, premiums are amortized to call date and discounts are accreted to maturity, on a level yield basis.

Current expected credit losses (“CECL”):  The corporate and municipal bonds in Wesbanco’s held-to-maturity debt portfolio are analyzed quarterly for CECL. 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 CECL on an individual security basis. The CECL calculated amount is adjusted quarterly and is recorded in an allowance for expected credit losses on the balance sheet that is deducted from the amortized cost basis of the held-to-maturity portfolio as a contra asset, with the losses recorded on the income statement within the provision for credit losses.  Because Wesbanco’s held-to-maturity investments in mortgage-backed securities and collateralized mortgage obligations are all either issued by a direct governmental entity or a government-sponsored entity, there is no historical evidence supporting the establishment of a CECL reserve; therefore, Wesbanco has estimated these losses at zero, and will monitor this assumption in the future for any economical or governmental policies that could affect this assumption.

Available-for-sale debt security impairment: An available-for-sale debt security is considered impaired if its fair value is less than its amortized cost basis.  If Wesbanco intends to sell or will be required to sell the investment prior to recovery of cost, the entire impairment will be recognized immediately in the Consolidated Statements of Income. If Wesbanco does not intend to sell, nor is it more likely than not that it will be required to sell, impaired securities prior to the recovery of their cost, a review is conducted each quarter to determine if any portion of the impairment is due to credit losses. In estimating credit losses, Wesbanco first considers the financial condition and near-term prospects of the issuer, evaluating any credit downgrades or other indicators of a potential credit problem, the type of security, either fixed or equity, and the receipt of principal and interest according to the contractual terms. If there are no indications that the impairment is credit-related, the impairment is recognized in other comprehensive income in the Consolidated Balance Sheet. If the impairment is considered to be credit-related based on management’s review of the various factors that indicate credit impairment, the amount of credit impairment is calculated using the present value of future expected cash flows. If the present value of future expected cash flows is less than the amortized cost basis of the security, a credit loss exists and an allowance for expected credit losses is recorded, limited by the total unrealized loss on the security, and is recognized in the Consolidated Statements of Income. The non-credit portion is calculated as the difference between the total unrealized loss and the credit portion of that loss and is recognized in other comprehensive income.

Loans and Loans Held for Sale — Loans originated by Wesbanco are reported at the principal amount outstanding, net of unearned income including credit valuation adjustments, unamortized deferred loan fee income and loan origination costs. Interest is accrued as earned on loans except where doubt exists as to collectability, in which case accrual of income is discontinued. Loans originated and intended for sale are carried, in aggregate, at their estimated market value, as Wesbanco elected the fair value option on October 1, 2017. 

Loan origination fees and direct costs are deferred and accreted or amortized into interest income, as an adjustment to the yield, over the life of the loan using the level yield method, or an approximation thereof. When a loan is paid off, the remaining unaccreted or unamortized net origination fees or costs are immediately recognized into income.

Loans are generally placed on non-accrual when they are 90 days past due, unless the loan is well-secured and in the process of collection.  Loans may be returned to accrual status when a borrower has resumed paying principal and interest for a sustained period of at least six months and Wesbanco is reasonably assured of collecting the remaining contractual principal and interest.  Loans are returned to accrual status at an amount equal to the principal balance of the loan at the time of non-accrual status less any payments applied to principal during the non-accrual period.  Loans are reported as a troubled debt restructuring when Wesbanco, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider.   Refer to the “Troubled Debt Restructurings” policy below for additional detail.

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A loan is considered non-performing, based on current information and events, if it is probable that Wesbanco will be unable to collect the payments of principal and interest when due according to the original contractual terms of the loan agreement.  Non-performing loans include all non-accrual loans and troubled debt restructurings. Wesbanco recognizes interest income on non-accrual loans on the cash basis only if recovery of principal is reasonably assured.

Consumer loans are charged down to the net realizable value at 120 days past due for closed-end loans and 180 days past due for open-end revolving lines of credit.  Residential real estate loans are charged down to the net realizable value of the collateral at 180 days past due.  Commercial loans are charged down to the net realizable value when it is determined that Wesbanco will be unable to collect the principal amount in full.  Loans are reclassified to other assets at the net realizable value when foreclosure or repossession of the collateral occurs.  Refer to the “Other Real Estate Owned and Repossessed Assets” policy below for additional detail.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law, which, in part, established a loan program administered through the U.S. Small Business Administration ("SBA"), referred to as the Paycheck Protection Program ("PPP"). Under the PPP, small businesses, sole proprietorships, independent contractors, non-profit organizations and self-employed individuals could apply for loans from existing SBA lenders and other approved regulated lenders that enrolled in the program, subject to numerous limitations and eligibility criteria. Wesbanco has participated as a lender in the PPP program.  All loans have a 1% interest rate and Wesbanco earns a fee that is based upon a tiered schedule corresponding with the amount of the loan to the borrower, which is deferred and recognized over the life of the loan.  Based upon the borrower meeting certain criteria as defined by the CARES act, the loan may be forgiven by the SBA.  Wesbanco reports these loans at their principal amount outstanding, net of unearned income, unamortized deferred loan fee income and loan origination costs.  Interest is accrued as earned and loan origination fees and direct costs are deferred and accreted or amortized into interest income, as an adjustment to the yield, over the life of the loan using the level yield method, or an approximation thereof. When a PPP loan is paid off or forgiven by the SBA, the remaining unaccreted or unamortized net origination fees or costs are immediately recognized into income.

On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (“Economic Aid Act”) was signed into law in response to the continuing effects of the pandemic on the economy and provided for extensions and amendments to many features of the CARES Act.  In particular, the Economic Aid Act further reauthorized PPP lending, providing for a new pool of available funds under the PPP through March 31, 2021, and among other things, modified the provisions related to making PPP loans and the forgiveness of such loans.  The Economic Aid Act also authorized second draw PPP loans for borrowers that previously received a PPP loan under CARES Act provisions, subject to certain conditions.

Troubled Debt Restructurings (“TDR”)— A restructuring of a loan constitutes a TDR if the creditor, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. The determination of whether a concession has been granted includes an evaluation of the debtor’s ability to access funds at a market rate for debt with similar risk characteristics and among other things, the significance of the modification relative to unpaid principal or collateral value of the debt, and/or the significance of a delay in the timing of payments relative to the frequency of payments, original maturity date, or the expected duration of the loan.  The most common concessions granted generally include one or more modifications to the terms of the debt such as a reduction in the interest rate below the prevailing market rate for the remaining life of the debt, an extension of the maturity date at an interest rate lower than the prevailing market rate for new debt with similar risk, or reduction of the unpaid principal or interest.  Additionally, all consumer bankruptcies are considered TDR; all TDRs are considered nonperforming loans.

When determining whether a debtor is experiencing financial difficulties, consideration is given to any known default on any of its debt or whether it is probable that the debtor would be in payment default in the foreseeable future without the modification.  Other indicators of financial difficulty include whether the debtor has declared or is in the process of declaring bankruptcy, the debtor’s ability to continue as a going concern, or the debtor’s projected cash flow to service its debt (including principal & interest) in accordance with the contractual terms for the foreseeable future, without a modification.  If the payment of principal at original maturity is primarily dependent on the value of collateral, the current value of that collateral is considered in determining whether the principal will be paid.  

The restructuring of a loan does not increase the allowance or provision for credit losses unless the loan is extended or the loans are commercial loans that are individually evaluated for impairment, in which case a specific reserve is established pursuant to GAAP.  Portfolio segment loss history is the primary factor for establishing the allowance for residential real estate, home equity and consumer TDRs.

Non-accrual loans that are restructured remain on non-accrual, but may move to accrual status after they have performed according to the restructured terms for a period of time.  TDRs on accrual status generally remain on accrual as long as they continue to perform in accordance with their modified terms.  TDRs may also be placed on non-accrual if they do not perform in accordance with the restructured terms.  Loans may be removed from TDR status after they have performed according to the renegotiated terms for a period of time if the interest rate under the modified terms is at or above market, is restructured or refinanced at market or if the loan returns to its original terms.

Section 4013 of the CARES Act, “Temporary Relief from Troubled Debt Restructurings,” allows financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. On April 7, 2020, the joint federal regulatory agencies issued a statement, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)” (“Interagency Statement”), which further discusses loan modifications related to COVID-19. Wesbanco has extended up to a 180 day delay in loan principal and/or interest payments for

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customers affected by the COVID-19 pandemic. These customers must meet certain criteria, such as they were in good standing and not more than 30 days past due either as of December 31, 2019, or as of the implementation of the modification program under the Interagency Statement, as well as other requirements noted in the regulatory agencies’ revised statement. Based on the CARES Act provisions and the guidance noted above, Wesbanco does not classify the COVID-19 loan modifications as TDRs, nor are the customers considered past due with regards to their delayed payments to the extent they meet the criteria. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program.

On August 3, 2020, the joint federal regulatory agencies issued a statement, “Joint Statement on Additional Loan Accommodations Related to COVID-19”. This statement provides financial institutions with considerations for certain customers nearing the end of their COVID-19 loan deferral period noted above.  As per this guidance and in accordance with the CARES Act noted above, Wesbanco developed a plan to assist certain customers with additional deferrals of principal and/or interest. This plan, relating to existing commercial loans in the hospitality sector, may provide certain relief to these portfolio loans if they meet certain criteria regarding the borrower, underlying property and potential guarantors / co-borrowers. If a loan were to meet the criteria, they would be eligible to have twelve months of interest payments deferred or three months of principal and interest payments plus nine months of interest-only payments. There are predetermined contractual re-evaluation triggers reviewed throughout the deferred period to determine if a borrower should return to a normal amortization schedule prior to the completion of the twelve month period. The Economic Aid Act further extends relief granted by the CARES Act for TDRs, initially slated to end on December 31, 2020, by one year to December 31, 2021.

Acquired Loans— Loans acquired in connection with acquisitions are recorded at their acquisition-date fair value with no carryover of related allowance for credit losses.  Acquired loans are classified into two categories; purchased financial instruments with more than insignificant credit deterioration (“PCD”) loans, and loans with insignificant credit deterioration (“non-PCD”). PCD loans are defined as a loan or group of loans that have experienced more than insignificant credit deterioration since origination. Non-PCD loans will have an allowance established on acquisition date, which is recognized in the current period provision for credit losses. For PCD loans, an allowance is recognized on day 1 by adding it to the fair value of the loan, which is the “Day 1 amortized cost”. There is no credit loss expense recognized on PCD loans because the initial allowance is established by grossing-up the amortized cost of the PCD loan. Determining the fair value of the acquired loans involves estimating the principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest.  Management considers a number of factors in evaluating the acquisition-date fair value including the remaining life of the acquired loans, delinquency status, estimated prepayments, payment options and other loan features, internal risk grade, estimated value of the underlying collateral and interest rate environment.

PCD loans are accounted for in accordance with Accounting Standards Codification (“ASC”) 326-20, Financial Instruments – Credit Losses – Measure at Amortized Cost, if, at acquisition, the loan or pool of loans has experienced more-than-insignificant credit deterioration since origination. At acquisition, Wesbanco considers several factors as indicators that an acquired loan or pool of loans has experienced more-than-insignificant credit deterioration.  These factors include, but are not limited to, loans 30 days or more past due, loans with an internal risk grade of below average or lower, loans classified as non-accrual by the acquired institution, the materiality of the credit and loans that have been previously modified in a troubled debt restructuring.

Under ASC 326-20, a group of loans with similar risk characteristics can be assessed to determine if the pool of loans is PCD. However, if a loan does not have similar risk characteristics as any other acquired loan, the loan is individually assessed to determine if it is PCD. In addition, the initial allowance related to acquired loans can be estimated for a pool of loans if the loans have similar risk characteristics. Even if the loans were individually assessed to determine if they were PCD, they can be grouped together in the initial allowance calculation if they share similar risk characteristics. Since Wesbanco uses the discounted cash flow (DCF) approach, the initial allowance calculation for PCD loans is calculated as the expected contractual cash shortfalls, discounted at the rate that equals the net present value of estimated future cash flows expected to be collected with the purchase price of the loan(s). If a PCD loan has an unfunded commitment at acquisition, the initial allowance for credit losses calculation reflects only the expected credit losses associated with the funded portion of the PCD loan. Expected credit losses associated with the unfunded commitment are included in the initial measurement of the commitment.

For PCD loans, the non-credit discount or premium is allocated to individual loans as determined by the difference between the loan’s amortized cost basis and the unpaid principal balance. The non-credit premium or discount is recognized into interest income on a level yield basis over the remaining expected life of the loan. For non-PCD loans, the interest and credit discount or premium is allocated to individual loans as determined by the difference between the loan’s amortized cost basis and the unpaid principal balance. The premium or discount is recognized into interest income on a level yield basis over the remaining expected life of the loan.

Allowance for Credit Losses— The allowance for credit losses specific to loans under CECL, which Wesbanco implemented on January 1, 2020, reduces the loan portfolio to the net amount expected to be collected, representing the lifetime expected losses at the initial origination date.  Similarly, an allowance for unfunded loan commitments, which is recorded in other liabilities, represents expected losses on unfunded commitments. Fluctuations in the allowance for credit losses specific to loans, the allowance for unfunded loan commitments, and the allowance for held-to-maturity debt securities are recognized in the provision for credit losses on the consolidated statement of operations. The allowance incorporates forward-looking information and applies a reversion methodology beyond the reasonable and supportable forecast. The allowance is increased by a provision charged to operating expense and reduced by charge-offs, net of recoveries.  Management evaluates the appropriateness of the allowance at least quarterly.  This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change from period to period. 

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The allowance for credit loss calculation specific to loans is based on the loan’s amortized cost basis, which is comprised of the unpaid principal balance of the loan, deferred loan fees (costs) and acquired premium (discount) minus any write-downs. Wesbanco made an accounting policy election to exclude accrued interest from the measurement of the allowance for credit losses because the Company has a robust policy in place to reverse or write-off accrued interest when a loan is placed on non-accrual, and also Wesbanco made an accounting policy election to reverse accrued interest deemed uncollectible as a reversal of interest income. However, Wesbanco is reserving, as part of the allowance for credit losses, for accrued interest on loan modifications under the CARES Act due to the nature and timing of these deferrals.

The allowance for credit losses reflects the risk of loss on the loan portfolio. To appropriately measure expected credit losses, management disaggregates the loan portfolio into pools of similar risk characteristics. The Company utilizes the probability of default (“PD”) / loss given default (“LGD”) approach to calculate the expected loss for each segment, which is then discounted to net present value. PD is the probability the asset will default within a given timeframe and LGD is the percentage of the assets not expected to be collected due to default. The primary macroeconomic drivers of the quantitative model include forecasts of national unemployment and interest rate spreads.  Management relies on macroeconomic forecasts obtained from various reputable sources, which may include the Federal Open Market Committee (FOMC) forecast and other publicly available forecasts from well recognized, leading economists.  These forecasts can range from one to two years, depending upon the facts and circumstances of the current state of the economy, portfolio segment and management’s judgement of what can be reasonably supported.  The model reversion period ranges from one to three years.

The allowance for credit losses is calculated over the loan’s contractual life. For term loans, the contractual life is calculated based on the maturity date. For commercial and industrial (“C&I”) revolving loans with no stated maturity date, the contractual life is calculated based on the internal review date. For all other revolving loans, the contractual life is based on either the estimated maturity date or a default date. The contractual term does not include expected extensions, renewals or modifications unless management has a reasonable expectation as of the reporting period that Wesbanco will execute a TDR with the borrower. Management assumes a loan will become a TDR if a consumer loan has matured, has a principal balance, and has previously been partially charged-off. This assumption extends the maturity of these loans to the six months beyond maturity date.

The loan portfolio is segmented based on the risk profiles of the loans. Commercial loans are segmented between commercial real estate (“CRE”), which are collateralized by real estate, and C&I, which are typically utilized for general business purposes. CRE is further segmented between land and construction (“LCD”) and improved property, which are generally loans to purchase or refinance owner occupied or non-owner occupied investment properties. LCD loans have a unique risk that the developer or builder may not complete the project or not complete it on time or within budget. Improved property loans are reviewed for risk based on the underlying real estate property such as rental or owner income, appraisal value and other current lease terms, which affect debt service coverage and loan to value. Retail loans are a homogenous group, generally consisting of standardized products that are smaller in amount and distributed over a large number of individual borrowers. The group is segmented into three categories – residential real estate, HELOC and consumer.

Contractual terms are adjusted for estimated prepayments to arrive at expected cash flows. Wesbanco models term loans with an annualized “prepayment” rate. When Wesbanco has a specific expectation of differing payment behavior for a given loan, the loan may be evaluated individually. For revolving loans that do not have a principal payment schedule, a curtailment rate is factored into the cash flow.

The evaluation also considers qualitative factors such as economic trends and conditions, which includes levels of regional unemployment, real estate values and the impact on specific industries and geographical markets, changes in lending policies and underwriting standards, delinquency and other credit quality trends, concentrations of credit risk, if any, the results of internal loan reviews and examinations by bank regulatory agencies pertaining to the allowance for credit losses.  Management relies on observable data from internal and external sources to the extent it is available to evaluate each of these factors and adjusts the model’s quantitative results to reflect the impact these factors may have on probable losses in the portfolio.  As a result of the COVID-19 pandemic, there is concern within the banking industry that deferrals are delaying the overall impact of COVID-19 on the loan portfolio.  As such, temporary COVID-19 qualitative factors have been incorporated to recognize increased risk within the portfolio that is not captured by the quantitative output including COVID-19 pandemic factors related to the transient credit risk not covered by the traditional allowance process, adjusted to Wesbanco’s regional footprint, deferred interest on modified loans, and hospitality industry concentration.  

Commercial loans, including CRE and C&I, greater than $1 million in balance that are reported as non-accrual, troubled debt restructuring or that have other unique characteristics are tested individually for estimated credit losses.  Specific reserves are established when appropriate for such loans based on the net present value of expected future cash flows of the loan or the estimated realizable value of the collateral, if any.  

Management may also adjust its assumptions to account for differences between expected and actual losses from period to period.  The variability of management’s assumptions could alter the level of the allowance for credit losses and may have a material impact on future results of operations and financial condition.  The loss estimation models and methods used to determine the allowance for credit losses are continually refined and enhanced.

For periods ended December 31, 2019 and prior, which preceded the implementation of CECL, the allowance for credit losses represented management’s estimate of probable losses inherent in the loan portfolio and in future advances against loan commitments. Determining the amount of the allowance required significant judgment about the collectability of loans and the factors that deserved consideration in estimating probable credit losses. The allowance was increased by a provision charged to operating expense and reduced by

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charge-offs, net of recoveries. Management evaluated the appropriateness of the allowance at least quarterly. This evaluation was inherently subjective as it required material estimates that may be susceptible to significant change from period to period.

The evaluation included an assessment of quantitative factors such as actual loss experience within each category of loans and testing of certain commercial loans for impairment. The evaluation also considered qualitative factors such as economic trends and conditions, which included levels of unemployment, real estate values and the impact on specific industries and geographical markets, changes in lending policies and underwriting standards, delinquency and other credit quality trends, concentrations of credit risk, if any, the results of internal loan reviews and examinations by bank regulatory agencies, the volatility of historical loss rates and the velocity of changes in historical loss rates pertaining to the allowance for credit losses. Management relied on observable data from internal and external sources to the extent it was available to evaluate each of these factors and adjusted the actual historical loss rates to reflect the impact these factors may have on probable losses in the portfolio.

Commercial real estate and commercial and industrial loans greater than $1 million that were reported as non-accrual or as a troubled debt restructuring were tested individually for impairment. Specific reserves were established when appropriate for such loans based on the present value of expected future cash flows of the loan or the estimated realizable value of the collateral, if any.

General reserves were established for loans that were not individually tested for impairment based on historical loss rates adjusted for the impact of the qualitative factors discussed above. Historical loss rates for commercial real estate and commercial and industrial loans were determined for each internal risk grade or group of pass grades using a migration analysis. Residential real estate, home equity and consumer loans were not risk graded, so historical loss rates were utilized to determine the total of each category of loans. Historical loss rates for deposit account overdrafts were based on actual losses in relation to average overdrafts for the period.

Management also qualitatively adjusted its assumptions to account for differences between estimated and actual incurred losses from period to period. The variability of management’s assumptions could have altered the level of the allowance for credit losses and may have had a material impact on future results of operations and financial condition. The loss estimation models and methods used to determine the allowance for credit losses were continually refined and enhanced.

Premises and Equipment— Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated economic useful lives of the leased assets or the remaining terms of the underlying leases. Useful lives range from 3 to 10 years for furniture and equipment, 15 to 39 years for buildings and building improvements, and 15 years for land improvements. Maintenance and repairs are expensed as incurred while major improvements that extend the useful life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset.

Operating leases are recorded as a right of use (“ROU”) asset and operating lease liability, included in premises and equipment, net and other liabilities, respectively. Operating lease ROU assets represent the right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the lease commencement date. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded primarily in net occupancy expense in the consolidated statements of comprehensive income.

Other Real Estate Owned and Repossessed Assets— Other real estate owned and repossessed assets, which are considered available-for-sale and are reported in other assets, are carried at the lower of cost or their estimated current fair value, less estimated costs to sell. Other real estate owned consists primarily of properties acquired through, or in lieu of, foreclosure. Repossessed collateral primarily consists of automobiles and other types of collateral acquired to satisfy defaulted consumer loans. Subsequent declines in fair value, if any, income and expense associated with the management of the collateral, and gains or losses on the disposition of these assets are recognized in the Consolidated Statements of Income in non-interest income. Refer to Note 14, “Revenue Recognition” for further detail.

Goodwill and Other Intangible Assets— Wesbanco accounts for business combinations using the acquisition method of accounting. Accordingly, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest of an acquired business are recorded at their estimated fair values as of the date of acquisition with any excess of the cost of the acquisition over the fair value recorded as goodwill. Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability.

Goodwill is not amortized but is evaluated for impairment annually, or more often if events or circumstances indicate it may be impaired. Finite-lived intangible assets, which consist primarily of core deposit and customer list intangibles (long-term customer-relationship intangible assets) are amortized using straight-line and accelerated methods over their weighted-average estimated useful lives, ranging from ten to sixteen years in total, and are tested for impairment whenever events or circumstances indicate that their carrying amount may not be recoverable. Non-compete agreements are recognized in other assets on the balance sheet and are amortized on a straight-line basis over the life of the respective agreements, ranging from one to four years.

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Goodwill is evaluated for impairment by either assessing qualitative factors to determine whether it is necessary to perform the goodwill impairment test, or Wesbanco may elect to perform a quantitative goodwill impairment test. Under the qualitative assessment, Wesbanco assesses qualitative factors to determine whether it is more likely than not that the fair value of its reporting units are less than their carrying amounts, including goodwill. If it is more likely than not, the goodwill impairment test is used to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized, if any. The estimated fair value of each reporting unit is compared to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, the goodwill of that reporting unit is not considered impaired, and no impairment loss is recognized. However, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized based on the excess of a reporting unit’s carrying value over its fair value.

Intangible assets with finite useful lives are evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized when the carrying amount of an intangible asset with a finite useful life is not recoverable from its undiscounted cash flows and is measured as the difference between the carrying amount and the fair value of the asset. Wesbanco does not have any indefinite-lived intangible assets.

Bank-Owned Life Insurance— Wesbanco has purchased life insurance policies on certain executive and other officers. Wesbanco receives the cash surrender value of each policy upon its termination or benefits are payable upon the death of the insured. These policies are recorded in the Consolidated Balance Sheets at their net cash surrender value. Changes in net cash surrender value are recognized in non-interest income in the Consolidated Statements of Income. Adjustments to cash surrender value and death benefits received, if recognized as income, are currently tax-exempt.

Interest Rate Lock Commitments— In order to attract potential home borrowers, Wesbanco offers interest rate lock commitments (“IRLC”) to such potential borrowers. IRLC are generally for sixty days and guarantee a specified interest rate for a loan if underwriting standards are met, but the commitment does not obligate the potential borrower to close on the loan. Accordingly, some IRLC expire prior to the funding of the related loan. For IRLC issued in connection with potential loans intended for sale, which consist primarily of originated longer-term fixed rate residential home mortgage loans that qualify for secondary market sale, the Bank enters into positions of forward month mortgage-backed securities to be announced (“TBA”) contracts on a mandatory basis or on a one-to-one forward sales contract on a best efforts basis.

A mortgage loan sold on a mandatory basis is sold to the secondary market when the mortgage loan is funded. Wesbanco enters into TBA contracts in order to control interest rate risk during the period between the IRLC and the sale of the mortgage loan. The IRLC is executed between the mortgagee and Wesbanco, and the forward TBA contract is executed between Wesbanco and a counterparty. Both the IRLC and the forward TBA contract are considered derivatives. A mortgage loan sold on a best efforts basis is locked into a forward sales contract on the same day as the IRLC to control interest rate risk during the period between the IRLC and the sale of the mortgage loan. The IRLC is executed between the mortgagee and Wesbanco, and the forward sales contract is executed between Wesbanco and a counterparty. Both the IRLC and the forward sales contract are considered derivatives. Both types of derivatives are recorded at fair value and are not designated in a qualified hedged accounting program. The changes in fair value are recorded in current earnings within mortgage banking income in the Consolidated Statements of Income. The fair value of IRLC is the gain or loss that would be realized on the underlying loans assuming exercise of the commitments under current market rates versus the rate incorporated in the commitments, taking into consideration loans cancelled prior to closing. The fair value of forward sales contracts is based on quoted market prices. Since loans typically close before receipt of funding from an investor, they are accounted for at fair value as “Loans Held for Sale” in the Consolidated Balance Sheets.

Derivative Instruments and Hedging Activities— Wesbanco records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether Wesbanco has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Wesbanco enters into back-to-back interest rate swaps with commercial banking customers and then with counterparties for the offsetting interest rate swap. Currently, none of Wesbanco’s derivatives are designated in qualifying hedging relationships, as the derivatives are not used to manage risks within Wesbanco’s assets or liabilities. As such, all changes in fair value of Wesbanco’s derivatives are recognized directly in earnings.

Income Taxes— The provision for income taxes included in the Consolidated Statements of Income includes both federal and state income taxes and is based on income in the financial statements, rather than amounts reported on Wesbanco’s income tax returns. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases at which rates they are expected to turnaround. A test of the anticipated realizability of deferred tax assets is performed at least annually.

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Fair Value— Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value measurements are not adjusted for transaction costs. The ASC also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are described below:

Level 1—Quoted prices in active markets for the same security that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-based valuation techniques where all significant assumptions are observable, either directly or indirectly, in the market;

Level 3—Valuation is generated from model-based techniques where one or more significant assumptions are not observable, either directly or indirectly, in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques may include use of discounted cash flow models and similar techniques.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Earnings Per Common Share— Basic earnings per common share (“EPS”) is calculated by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. For diluted EPS, the weighted-average number of shares for the period is increased by the number of shares, which would be issued assuming the exercise of in-the-money common stock options and any outstanding warrants. Time-based restricted stock shares are recorded as issued and outstanding upon their grant, rather than upon vesting, and therefore are included in the weighted-average shares outstanding due to voting rights granted at the time restricted stock is granted. Performance and market-based restricted stock shares are recorded as issued and outstanding upon their achieving the required performance or market factors. These restricted shares are included in the number of shares outstanding for diluted EPS if their performance or market factors are expected to be achieved as of the reporting date.

Trust Assets— Assets held by the Bank in fiduciary or agency capacities for its customers are not included as assets in the Consolidated Balance Sheets. Certain money market trust assets are held on deposit at the Bank and are accounted for as such.

Stock-Based Compensation— Stock-based compensation awards granted, comprised of stock options, performance and time-based restricted stock, and total shareholder return (“TSR”) awards are valued at fair value and compensation cost is recognized on a straight-line basis over the requisite service or performance period of each award. For service-based awards with graded vesting schedules, compensation expense is divided among the vesting periods with each separately vested portion of the award recognized in compensation expense on a straight-line basis over the requisite service period. For performance-based awards and TSR awards, compensation expense is recognized evenly over the performance period, based on the probability of the achievements of the performance or market conditions set forth in the plans. Upon adoption of Accounting Standards Update (“ASU”) 2016-09, “Compensation-Stock Compensation (Topic 718)”, Wesbanco recognizes forfeitures as they occur rather than estimating them over the life of the award.

Defined Benefit Pension Plan— Wesbanco recognizes in the statement of financial position an asset for the plan’s overfunded status or a liability for the plan’s underfunded status. Wesbanco recognizes fluctuations in the funded status in the year in which the changes occur through other comprehensive income. Plan assets are determined based on fair value generally representing observable market prices. The projected benefit obligation is determined based on the present value of projected benefit distributions at an assumed discount rate. The discount rate utilized is based on a fitted yield curve approach whereby the yield curve compares the expected stream of future benefit payments for the plan to high quality corporate bonds available in the marketplace to determine an equivalent discount rate. Periodic pension expense includes service costs, interest costs based on an assumed discount rate, an expected return on plan assets based on an actuarially-derived market-related value, an assumed rate of annual compensation increase, and amortization or accretion of actuarial gains and losses as well as other actuarial assumptions. The service cost component is recognized in salaries and wages and the remaining costs are recognized in employee benefits within the Company’s Consolidated Statement of Income. Wesbanco utilizes a full yield curve approach in the estimation of service and interest components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The plan has been closed to new entrants since August 2007; however, benefits are still earned for those plan participants with continuing employment after August 2007. Refer to Note 13, “Employee Benefit Plans” for further detail.

Post-retirement Medical Benefit Plan— Wesbanco acquired a non-qualified supplemental retirement plan for certain key employees from Farmers Capital Bank Corp. (“FFKT”). The Plan provides lifetime medical and dental benefits upon retirement for certain employees meeting the eligibility requirement, which were amended by Wesbanco upon acquisition. Wesbanco recognizes a liability for the projected benefit obligation in the Consolidated Balance Sheets in other liabilities as this plan is unfunded until period payments are made. Wesbanco recognizes fluctuations in the projected benefit obligation through other comprehensive income. The projected benefit obligation is based on the present value of projected medical and dental obligations at an assumed discount rate. Periodic benefit expense includes service cost, interest cost based on an assumed discount rate, and amortization or accretion of actuarial gains and losses, as well as other actuarial assumptions. Refer to Note 13, “Employee Benefit Plans” for further detail.

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Recent accounting pronouncements—The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) as noted below.

ASU 2020-04 Reference Rate Reform (Topic 848)

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”. Due to the potential discontinuance of the London Interbank Offered Rate (LIBOR), regulators have undertaken reference rate initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU also provides optional expedients for contract modifications that replace a reference rate affected by reference rate reform. The guidance is effective as of March 12, 2020 through December 31, 2022. Wesbanco is assessing the impact of adopting the new guidance on the consolidated financial statements on an ongoing basis with no material impacts expected at this time.

ASU 2018-15 Intangibles – Goodwill and Other Internal-Use Software

In August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This ASU specifically aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license.  The ASU does not affect the accounting for the service element of a hosting arrangement that is a service contract.  The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.  For Wesbanco, this update was effective January 1, 2020. The adoption of this pronouncement did not have a material impact on Wesbanco’s Consolidated Financial Statements.

ASU 2018-14 Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20)

In August 2018, the FASB issued ASU 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” This ASU modifies Accounting Standards Codification (“ASC”) 715-20 to improve disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.  The guidance is effective for fiscal years ending after December 15, 2020. For Wesbanco, this update was effective January 1, 2020. The adoption of this pronouncement did not have a material impact on Wesbanco’s Consolidated Financial Statements.

ASU 2018-13 Fair Value Measurement – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU modifies the disclosure objective paragraphs of ASC 820 to eliminate (1) “at a minimum” from the phrase “an entity shall disclose at a minimum” and (2) other similar “open ended” disclosure requirements to promote the appropriate exercise of discretion of entities.  The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  For Wesbanco, this update was effective January 1, 2020. The adoption of this pronouncement did not have a material impact on Wesbanco’s Consolidated Financial Statements.

ASU 2016-13 Financial Instruments – Credit Losses (Topic 326)

In September 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326),” which require entities to use a new forward-looking “expected loss” model also referred to as the current expected credit loss model (“CECL”) on trade and other receivables, held-to-maturity debt securities, loans and other instruments that generally will result in the earlier recognition of allowances for credit losses.  For available-for-sale debt securities with unrealized losses, entities measure credit losses in a manner similarly to current procedures, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.  Entities will have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments” and in May 2019 the FASB issued ASU 2019-05, “Financial Instruments – Credit Losses (Topic 326), Targeted Transition Relief. Public business entities must apply the new requirements for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, which for Wesbanco was effective January 1, 2020.  In December 2018, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (“FDIC”) and the Office of Comptroller of the Currency (“OCC”) approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ adoption of the CECL methodology. The final rule provides banking organizations the option to phase-in, over a three-year period, the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In response to the COVID-19 pandemic, the joint federal bank regulatory agencies issued an optional extension of the regulatory capital transition, which allows for a two-year delay and then a three-year transition period from January 1, 2022 through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period includes both the initial impact of our adoption of CECL at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during each quarter of the two-year period ended December 31, 2021, (collectively, the “CECL regulatory capital transition adjustment”). Wesbanco has elected to defer the impact of CECL on its regulatory capital for two years and then will phase-in the impact of the adoption of this standard on the regulatory capital calculations over the subsequent three-year period.

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Under CECL, acquired loans or pools of loans that have experienced more-than-insignificant credit deterioration are deemed to be PCD loans, and are grossed-up on day 1 by the initial credit estimate through the allowance as opposed to a reduction in the loan’s amortized cost. The credit mark on acquired loans deemed not to be PCD loans are reflected as a reduction in the loan’s amortized cost, with an allowance and corresponding provision for credit losses recorded in the first reporting period after acquisition through current period earnings, while the loan mark will accrete through interest income over the life of such loans. At acquisition, Wesbanco will consider several factors as indicators that an acquired loan or pool of loans has experienced more-than-insignificant credit deterioration. These factors may include loans 30 days or more past due, loans with an internal risk grade of below average or lower, loans classified as non-accrual by the acquired institution, materiality of the credit and loans that have been previously modified in a TDR. Upon adoption of this standard, acquired loans from prior acquisitions that met the guidelines under ASC 310-30 (formerly known as “purchased credit-impaired”) were reclassified as PCD loans. The accretable portion of the loan mark as of adoption date continues to accrete into interest income. However, the non-accretable portion of the loan mark was added to the allowance upon adoption, and any reversals of such mark will flow through the allowance in future periods. The loan mark on ASC 310-20 loans (“non-purchased credit-impaired”) from prior acquisitions continues to accrete through interest income over the life of such loans.

Wesbanco began planning in 2016 for the implementation of CECL and completed parallel runs in 2019 to ensure the various forecasting and modeling assumptions were reasonable and supportable, including certain qualitative factors that were developed to estimate the initial current expected credit loss allowance.  Wesbanco engaged a third-party to validate the data inputs and the models utilized in the CECL calculation. In addition, the Company prepared documentation of the accounting policy decisions, changes to the business processes and procedures, and the control environment under the adoption of this standard. The day 1 impact on the allowance for credit losses was $41.4 million, which included a $6.7 million adjustment for PCD loans and a $3.0 million adjustment related to loan commitments. The after-tax effect on retained earnings was $26.6 million as of January 1, 2020. The day 1 CECL calculation was derived from the selected assumption of a one-year reasonable and supportable forecast, which was obtained from a third-party vendor. After the forecast period, Wesbanco reverts back over a one year period to historical loss rates adjusting for prepayments and curtailments, to estimate losses over the remaining life of loans. The most sensitive assumptions include the length of the forecast and reversion periods, forecast of unemployment and interest rate spreads and prepayment speeds. See Note 5, “Loans and the Allowance for Credit Losses” for further detail.

Wesbanco recognized an allowance for credit losses for held-to-maturity (“HTM”) debt securities of $0.2 million as of January 1, 2020 upon adoption of this standard. See Note 4, “Securities” for further detail.

NOTE 2. MERGERS AND ACQUISITIONS

Old Line Bancshares, Inc. (“OLBK”)

On November 22, 2019, Wesbanco completed its acquisition of OLBK, a bank holding company headquartered in Bowie, MD. On the acquisition date, OLBK had approximately $3.0 billion in assets, excluding goodwill, which included approximately $2.5 billion in loans and $182.2 million in securities. The OLBK acquisition was valued at $494.0 million, based on Wesbanco’s closing stock price on November 22, 2019, of $36.75 and resulted in Wesbanco issuing 13,351,837 shares of its common stock in exchange for all of the outstanding shares of OLBK common stock including stock options of which the fair value is $3.3 million. The assets and liabilities of OLBK were recorded on Wesbanco’s Balance Sheet at their fair values as of November 22, 2019, the acquisition date, and OLBK’s results of operations have been included in Wesbanco’s Consolidated Statements of Income since that date. Based on the final purchase price allocation, Wesbanco recorded $231.8 million in goodwill and $32.9 million in core deposit intangibles in its Community Banking segment. None of the goodwill is deductible for income tax purposes, as the acquisition is accounted for as a tax-free exchange for tax purposes. As a result of the integration of the operations of OLBK, it is not practicable to determine revenue or net income included in Wesbanco’s operating results relating to OLBK since the date of acquisition, as OLBK’s results cannot be separately identified.

Wesbanco recorded merger-related expenses through the income statement of $6.5 million and $13.2 million associated with the OLBK acquisition for the years ended December 31, 2020 and December 31, 2019, respectively.

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The final purchase price of the OLBK acquisition and resulting goodwill is summarized as follows:

(in thousands)	November 22, 2019
Purchase Price:
Fair value of Wesbanco shares issued	$	493,936
Cash consideration for outstanding OLBK shares		16
Total purchase price	$	493,952
Fair value of:
Tangible assets acquired	$	2,891,363
Core deposit and other intangible assets acquired		32,899
Liabilities assumed		(2,722,165	)
Net cash received in the acquisition		60,041
Fair value of net assets acquired		262,138
Goodwill recognized	$	231,814

The following table presents the allocation of the purchase price of the assets acquired and the liabilities assumed at the date of acquisition:

(in thousands)	November 22, 2019
Assets acquired
Cash and due from banks	$	60,041
Securities		182,171
Loans		2,514,061
Goodwill and other intangible assets		264,713
Accrued income and other assets		195,131
Total assets acquired	$	3,216,117
Liabilities assumed
Deposits	$	2,375,574
Borrowings		286,047
Accrued expenses and other liabilities		60,544
Total liabilities assumed	$	2,722,165
Net assets acquired	$	493,952

The following table presents the changes in the allocation of the purchase price of the assets acquired and the liabilities assumed at the date of acquisition previously reported as of December 31, 2019:

(in thousands)	November 22, 2019
Goodwill recognized as of December 31, 2019	$	203,774
Change in fair value of net assets acquired:
Assets
Investment securities		(349	)
Loans		(31,532	)
Intangible assets		(692	)
Deferred tax assets		8,166
Premises and equipment		(3,067	)
Accrued income and other assets		(1,314	)
Liabilities
Borrowings		1,283
Accrued expenses and other liabilities		(535	)
Fair value of net assets acquired	$	(28,040	)
Increase in goodwill recognized		28,040
Goodwill recognized as of December 31, 2020	$	231,814

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Farmers Capital Bank Corporation (“FFKT”)

On August 20, 2018, Wesbanco completed its acquisition of FFKT, a bank holding company headquartered in Frankfort, KY. On the acquisition date, FFKT had approximately $1.6 billion in assets, excluding goodwill, which included approximately $1.0 billion in loans and $239.3 million in securities. The FFKT acquisition was valued at $428.9 million, based on Wesbanco’s closing stock price on August 20, 2018 of $49.40, and resulted in Wesbanco issuing 7,920,387 shares of its common stock and $37.6 million in cash in exchange for all of the outstanding shares of FFKT common stock. The assets and liabilities of FFKT were recorded on Wesbanco’s Balance Sheet at their fair values as of August 20, 2018, the acquisition date, and FFKT’s results of operations have been included in Wesbanco’s Consolidated Statements of Income since that date. Based on the final purchase price allocation, Wesbanco recorded $223.3 million in goodwill and $37.4 million in core deposit intangibles in its Community Banking segment and $2.6 million in trust customer relationship intangibles in its trust and investment services segment. None of the goodwill is deductible for income tax purposes, as the acquisition is accounted for as a tax-free exchange for tax purposes. As a result of the full integration of the operations of FFKT, it is not practicable to determine revenue or net income included in Wesbanco’s operating results relating to FFKT since the date of acquisition, as FFKT’s results cannot be separately identified.

Wesbanco recorded merger-related expenses through the income statement of $3.2 million and $12.4 million associated with the FFKT acquisition for the years ended December 31, 2019 and 2018, respectively.

The final purchase price of the FFKT acquisition and resulting goodwill is summarized as follows:

(in thousands)	August 20, 2018
Purchase Price:
Fair value of Wesbanco shares issued	$	391,267
Cash consideration for outstanding FFKT shares		37,634
Total purchase price	$	428,901
Fair value of:
Tangible assets acquired	$	1,370,245
Core deposit and other intangible assets acquired		39,992
Liabilities assumed		(1,434,779	)
Net cash received in the acquisition		230,139
Fair value of net assets acquired		205,597
Goodwill recognized	$	223,304

The following table presents the allocation of the purchase price of the assets acquired and the liabilities assumed at the date of acquisition:

(in thousands)	August 20, 2018
Assets acquired
Cash and due from banks	$	230,139
Securities		239,321
Loans		1,025,800
Goodwill and other intangible assets		263,296
Accrued income and other assets		105,124
Total assets acquired	$	1,863,680
Liabilities assumed
Deposits	$	1,330,328
Borrowings		71,780
Accrued expenses and other liabilities		32,671
Total liabilities assumed	$	1,434,779
Net assets acquired	$	428,901

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First Sentry Bancshares, Inc. (“FTSB”)

On April 5, 2018, Wesbanco completed its acquisition of FTSB, a bank holding company headquartered in Huntington, WV.  On the acquisition date, FTSB had approximately $704.8 million in assets, excluding goodwill, which included approximately $447.3 million in loans and $142.9 million in securities.  The FTSB acquisition was valued at $108.3 million, based on Wesbanco’s closing stock price on April 5, 2018 of $42.96, and resulted in Wesbanco issuing 2,498,761 shares of its common stock and $1.0 million in cash in exchange for all of the outstanding shares of FTSB common stock including stock options. The assets and liabilities of FTSB were recorded on Wesbanco’s Balance Sheet at their fair values as of April 5, 2018, the acquisition date, and FTSB’s results of operations have been included in Wesbanco’s Consolidated Statements of Income since that date.  Based on the final purchase price allocation, Wesbanco recorded $67.7 million in goodwill and $8.1 million in core deposit intangibles in its Community Banking segment.  None of the goodwill is deductible for income tax purposes, as the acquisition is accounted for as a tax-free exchange for tax purposes.  As a result of the full integration of the operations of FTSB, it is not practicable to determine revenue or net income included in Wesbanco’s operating results relating to FTSB since the date of acquisition, as FTSB’s results cannot be separately identified.

For the year ended December 31, 2018, Wesbanco recorded merger-related expenses through the income statement of $5.5 million associated with the FTSB acquisition.  

The final purchase price of the FTSB acquisition and resulting goodwill is summarized as follows:

(in thousands)	April 5, 2018
Purchase Price:
Fair value of Wesbanco shares issued	$	107,347
Cash consideration for outstanding FTSB shares		975
Total purchase price	$	108,322
Fair value of:
Tangible assets acquired	$	609,593
Core deposit and other intangible assets acquired		8,078
Liabilities assumed		(664,172	)
Net cash received in the acquisition		87,124
Fair value of net assets acquired		40,623
Goodwill recognized	$	67,699

The following table presents the allocation of the purchase price of the assets acquired and the liabilities assumed at the date of acquisition.

(in thousands)	April 5, 2018
Assets acquired
Cash and due from banks	$	87,124
Securities		142,903
Loans		447,279
Goodwill and other intangible assets		75,777
Accrued income and other assets		19,411
Total assets acquired	$	772,494
Liabilities assumed
Deposits	$	590,065
Borrowings		70,710
Accrued expenses and other liabilities		3,397
Total liabilities assumed	$	664,172
Net assets acquired	$	108,322

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NOTE 3. EARNINGS PER COMMON SHARE

Earnings per common share are calculated as follows:

	For the Years Ended December 31,
(in thousands, except shares and per share amounts)	2020		2019		2018
Numerator for both basic and diluted earnings per common share:
Net income available to common shareholders	$	119,400	$	158,873	$	143,112
Denominator:
Total average basic common shares outstanding		67,260,796		56,108,084		48,889,041
Effect of dilutive stock options and other stock compensation		49,788		106,280		133,949
Total diluted average common shares outstanding		67,310,584		56,214,364		49,022,990
Earnings per common share—basic	$	1.78	$	2.83	$	2.93
Earnings per common share—diluted		1.77		2.83		2.92

As of December 31, 2020, 2019 and 2018, respectively, 497,540, 364,391 and 117,600 options to purchase shares were excluded in the diluted shares computation because the exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive.

As of December 31, 2020 and 2019, shares related to the total shareholder return plans were not included in the calculation because the effect would be antidilutive.  As of December 31, 2018, contingently issuable shares totaling 42,864 were estimated to be awarded under the 2018 and 2017 total shareholder return plans as stock performance targets were met to date and were included in the diluted calculation. The shares related to the 2017 total shareholder return plan were not included in the calculation because the effect would be antidilutive.

No performance-based restricted stock compensation was estimated to be awarded as of December 31, 2020. Performance-based restricted stock compensation totaling 25,616 and 17,081 shares were estimated to be awarded as of December 31, 2019 and 2018, respectively.  

On November 22, 2019, Wesbanco issued 13,351,837 shares of common stock to complete its acquisition of OLBK and granted 34,998 shares of restricted stock to certain OLBK employees. These shares are included in average shares outstanding beginning on that date. For additional information relating to the OLBK acquisition, refer to Note 2, “Mergers and Acquisitions.”

On August 20, 2018, Wesbanco issued 7,920,387 shares of common stock, 6,690 of which were from treasury stock, to complete its acquisition of FFKT and granted 18,685 shares of restricted stock to certain FFKT employees of which 4,922 shares were forfeited prior to vesting in 2020. These shares are included in average shares outstanding beginning on that date. For additional information relating to the FFKT acquisition, refer to Note 2, “Mergers and Acquisitions.”

On April 5, 2018, Wesbanco issued 2,498,761 shares of common stock to complete its acquisition of FTSB and granted 9,465 shares of restricted stock to certain FTSB employees. These shares are included in average shares outstanding beginning on that date. For additional information relating to the FTSB acquisition, refer to Note 2, “Mergers and Acquisitions.”

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NOTE 4. SECURITIES

The following table presents the fair value and amortized cost of available-for-sale and held-to-maturity debt securities:

	December 31, 2020									December 31, 2019
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available-for-sale debt securities
U.S. Treasury	$	39,975	$	7	$	—		$	39,982	$	32,790	$	47	$	(1	)	$	32,836
U.S. Government sponsored entities and    agencies		204,109		7,715		(142	)		211,682		157,088		2,862		(322	)		159,628
Residential mortgage-backed securities    and collateralized mortgage obligations    of government sponsored entities and    agencies		1,230,106		35,979		(1,348	)		1,264,737		1,803,268		18,850		(6,131	)		1,815,987
Commercial mortgage-backed securities    and collateralized mortgage obligations    of government sponsored entities and    agencies		308,903		11,464		(269	)		320,098		187,268		3,270		(129	)		190,409
Obligations of states and political    subdivisions		108,602		7,160		—			115,762		140,357		5,253		(1	)		145,609
Corporate debt securities		24,963		912		—			25,875		48,645		581		(137	)		49,089
Total available-for-sale debt securities	$	1,916,658	$	63,237	$	(1,759	)	$	1,978,136	$	2,369,416	$	30,863	$	(6,721	)	$	2,393,558
Held-to-maturity debt securities
U.S. Government sponsored entities and    agencies	$	7,779	$	265	$	—		$	8,044	$	9,216	$	30	$	(116	)	$	9,130
Residential mortgage-backed securities    and collateralized mortgage obligations    of government sponsored entities and    agencies		89,151		3,251		—			92,402		122,937		1,031		(261	)		123,707
Obligations of states and political    subdivisions		601,128		30,173		(59	)		631,242		686,376		20,475		(258	)		706,593
Corporate debt securities		33,154		3,341		—			36,495		33,224		1,869		—			35,093
Total held-to-maturity debt securities	$	731,212	$	37,030	$	(59	)	$	768,183	$	851,753	$	23,405	$	(635	)	$	874,523
Total debt securities	$	2,647,870	$	100,267	$	(1,818	)	$	2,746,319	$	3,221,169	$	54,268	$	(7,356	)	$	3,268,081

(1) Total held-to-maturity debt securities are presented on the balance sheet net of their allowance for credit losses totaling $0.3 million at December 31, 2020.

At December 31, 2020 and 2019 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.

Equity securities, of which $10.1 million consist of investments in various mutual funds held in grantor trusts formed in connection with the Company’s deferred compensation plan, are recorded at fair value and totaled $13.0 and $12.3 million at December 31, 2020 and 2019, respectively.

Wesbanco adopted ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities” on January 1, 2019. Upon adoption, Wesbanco reclassified $67.3 million of callable held-to-maturity municipal debt securities to available-for-sale debt securities.

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The following table presents the amortized cost and fair value of available-for-sale and held-to-maturity debt securities by contractual maturity at December 31, 2020.  Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay debt obligations with or without prepayment penalties.  Mortgage-backed securities and collateralized mortgage obligations are classified in the table below based on their contractual maturity date; however, regular principal payments and prepayments of principal are received on a monthly basis.

(in thousands)	Amortized Cost		Fair Value
Available-for-sale debt securities
Less than one year	$	52,867	$	52,943
1-5 years		159,663		167,823
5-10 years		367,366		380,117
Over 10 years		1,336,762		1,377,253
Total available-for-sale debt securities	$	1,916,658	$	1,978,136
Held-to-maturity debt securities
Less than one year	$	8,051	$	8,110
1-5 years		116,033		122,589
5-10 years		235,993		248,079
Over 10 years		371,135		389,405
Total held-to-maturity debt securities	$	731,212	$	768,183
Total debt securities	$	2,647,870	$	2,746,319

Securities with an aggregate fair value of $1.8 billion and $2.0 billion at December 31, 2020 and 2019, respectively, were pledged as security for public and trust funds, and securities sold under agreements to repurchase. Proceeds from the sale of available-for-sale securities were $226.1 million, $125.8 million and $82.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. Net unrealized gains (losses) on available-for-sale securities included in accumulated other comprehensive income, net of tax, as December 31, 2020, 2019, and 2018 were $46.9 million, $20.7 million and ($21.5) million, respectively.

The following table presents the gross realized gains and losses on sales and calls of available-for-sale and held-to-maturity debt securities, as well as gains and losses on equity securities from both sales and market adjustments resulting from the adoption of ASU 2016-01 effective January 1, 2018 for the years ended December 31, 2020, 2019 and 2018, respectively.  All gains and losses presented in the table below are included in the net securities gains (losses) line item of the income statement.  For those equity securities relating to the key officer and director deferred compensation plan, the corresponding change in the obligation to the participant is recognized in employee benefits expense.

	For the Years Ended December 31,
(in thousands)	2020			2019			2018
Debt securities:
Gross realized gains	$	3,816		$	1,497		$	128
Gross realized losses		(1,083	)		(981	)		(46	)
Net gains on debt securities	$	2,733		$	516		$	82
Equity securities:
Unrealized gains (losses) recognized on securities still held	$	1,541		$	1,226		$	(986	)
Net realized (losses) gains recognized on securities sold		(6	)		2,578			4
Net gains (losses) on equity securities	$	1,535		$	3,804		$	(982	)
Net securities gains (losses)	$	4,268		$	4,320		$	(900	)

On January 1, 2020, Wesbanco adopted CECL. Upon adoption, the Company recognized $0.2 million to opening retained earnings, which represents the CECL allowance as of January 1, 2020. 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 income statement in the provision for credit losses. Accrued interest receivable on held-to-maturity securities, which was $5.3 million as of December 31, 2020, 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 economical or governmental policies that could affect this assumption.

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The following table provides a roll-forward of the allowance for credit losses on held-to-maturity securities for the year ended December 31, 2020:

	Allowance for Credit Losses By Category
	For the Year Ended December 31, 2020
			Residential mortgage
			-backed
			securities and
			collateralized
			mortgage obligations		Obligations of
	U.S. Government		of government		state and		Corporate
	sponsored		sponsored entities		political		debt
(in thousands)	entities and agencies		and agencies		subdivisions		Securities		Total
Beginning balance at January 1, 2020	$	—	$	—	$	96	$	133	$	229
Current period provision		—		—		34		63		97
Write-offs		—		—		—		—		—
Recoveries		—		—		—		—		—
Ending balance at December 31, 2020	$	—	$	—	$	130	$	196	$	326

The following table provides information on unrealized losses on available-for-sale debt securities that have been in an unrealized loss position for less than twelve months and twelve months or more, for which an allowance for credit losses has not been recorded as of December 31, 2020:

	December 31, 2020
	Less than 12 months							12 months or more							Total
(dollars in thousands)	Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities
U.S. Treasury	$	—	$	—			—	$	—	$	—			—	$	—	$	—			—
U.S. Government sponsored    entities and agencies		18,308		(142	)		2		—		—			—		18,308		(142	)		2
Residential mortgage-backed    securities and collateralized    mortgage obligations of    government sponsored entities    and agencies		224,448		(1,227	)		41		4,136		(121	)		3		228,584		(1,348	)		44
Commercial mortgage-backed    securities and collateralized    mortgage obligations of    government sponsored entities    and agencies		97,266		(269	)		10		—		—			—		97,266		(269	)		10
Obligations of states and political    subdivisions		—		—			—		—		—			—		—		—			—
Corporate debt securities		—		—			—		—		—			—		—		—			—
Total temporarily impaired    securities	$	340,022	$	(1,638	)		53	$	4,136	$	(121	)		3	$	344,158	$	(1,759	)		56

Unrealized losses on debt securities in the table above represent temporary fluctuations resulting from changes in market rates in relation to fixed yields. Unrealized losses in the available-for-sale portfolio are accounted for as an adjustment, net of taxes, to other comprehensive income in shareholders’ equity.  Wesbanco does not believe the securities presented above are impaired due to reasons of credit quality, as substantially all debt securities are rated above investment grade and all are paying principal and interest according to their contractual terms. Wesbanco does not intend to sell, nor is it more likely than not that it will be required to sell, loss position securities prior to recovery of their cost, and therefore, management believes the unrealized losses detailed above do not require an allowance for credit losses relating to these securities to be recognized.

Securities that do not have readily determinable fair values and for which Wesbanco does not exercise significant influence are carried at cost. Cost method investments consist primarily of FHLB of Pittsburgh, Cincinnati and Indianapolis stock totaling $34.0 million and $66.8 million at December 31, 2020 and 2019, respectively, and are included in other assets in the Consolidated Balance Sheets. Cost method investments are evaluated for impairment whenever events or circumstances suggest that their carrying value may not be recoverable.

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The following table provides information on unrealized losses on held-to-maturity and available-for-sale debt securities that have been in an unrealized loss position for less than twelve months and twelve months or more as of December 31, 2019, prior to the date of adoption of the credit loss standard, and as defined by the previous accounting guidance in effect at that time:

	December 31, 2019
	Less than 12 months							12 months or more							Total
(dollars in thousands)	Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities
U.S Treasury	$	1,499	$	(1	)		1	$	—	$	—			—	$	1,499	$	(1	)		1
U.S. Government sponsored    entities and agencies		57,650		(274	)		25		6,593		(164	)		2		64,243		(438	)		27
Residential mortgage-backed    securities and collateralized    mortgage obligations of    government sponsored entities    and agencies		544,692		(3,725	)		116		272,884		(2,667	)		122		817,576		(6,392	)		238
Commercial mortgage-backed    securities and collateralized    mortgage obligations of    government sponsored entities    and agencies		43,123		(124	)		7		3,704		(5	)		2		46,827		(129	)		9
Obligations of states and political    subdivisions		17,876		(122	)		22		4,413		(137	)		8		22,289		(259	)		30
Corporate debt securities		4,120		(44	)		1		4,926		(93	)		2		9,046		(137	)		3
Total temporarily impaired    securities	$	668,960	$	(4,290	)		172	$	292,520	$	(3,066	)		136	$	961,480	$	(7,356	)		308

NOTE 5. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES

The recorded investment in loans is presented in the Consolidated Balance Sheets net of deferred loan fees and costs, and discounts on purchased loans. Net deferred loan income (costs) were $6.2 million and ($4.8) million at December 31, 2020 and 2019, respectively. The December 31, 2020 balance included $13.8 million of net deferred income from PPP loans.  The un-accreted discount on purchased loans from acquisitions was $39.4 million at December 31, 2020, including $2.4 million related to FTSB, $9.8 million related to FFKT and $22.1 million related to OLBK.  The unaccreted discount was $51.9 million at December 31, 2019.

	December 31,		December 31,
(in thousands)	2020		2019
Commercial real estate:
Land and construction	$	668,277	$	777,151
Improved property		5,037,115		4,947,857
Total commercial real estate		5,705,392		5,725,008
Commercial and industrial		1,681,182		1,644,699
Commercial and industrial - PPP		726,256		—
Residential real estate		1,720,961		1,873,647
Home equity		646,387		649,678
Consumer		309,055		374,953
Total portfolio loans		10,789,233		10,267,985
Loans held for sale		168,378		43,013
Total loans	$	10,957,611	$	10,310,998

On January 1, 2020, Wesbanco adopted ASU 2016-13 (Topic 326), Measurement of Credit Losses on Financial Instruments. Upon adoption, the Company recognized $41.4 million as an increase to the allowance for credit losses, which represents the difference in the incurred allowance as of December 31, 2019 and the CECL allowance as of January 1, 2020. This adjustment includes a $6.7 million increase to the allowance related to PCD loans as of January 1, 2020. See Note 1, “Summary of Significant Accounting Policies” for the Company’s revised accounting policies related to Loans and Allowance for Credit Losses and adoption of this standard.

The allowance for credit losses under CECL is calculated utilizing the PD / 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, loan risk grades, portfolio mix, concentrations and loan growth. For the calculation as

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of December 31, 2020, the one-year forecast was based upon a blended rate from two nationally-recognized published economic forecasts through December 31, 2020, and is primarily driven by the national unemployment and interest rate spread forecasts. Wesbanco’s blended forecast of national unemployment, at year end, was projected to peak at 6.6% in the first quarter, and subsequently decrease to an average of 6.2% over the remainder of the forecast period. The calculation utilized a one-year reversion period back to the Company’s historical loss rate by loan classification.  Included in the qualitative factors were COVID-19 pandemic factors related to the transient credit risk not covered by the traditional allowance process, adjusted to Wesbanco’s regional footprint, deferred interest on modified loans, and hospitality industry concentration. Wesbanco made an accounting policy election to exclude accrued interest from the measurement of the allowance for credit losses because the Company has a robust policy in place to reverse or write-off accrued interest when loans are placed on non-accrual. However, Wesbanco does have a $0.3 million reserve on the accrued interest related to loan modifications allowed under the CARES Act due to the timing and nature of these modifications. As of December 31, 2020, accrued interest receivable for loans was $54.7 million, including $25.6 million related to COVID-19 loan modifications as permitted under the CARES Act.

The following tables summarize changes in the allowance for credit losses applicable to each category of the loan portfolio:

	For the Year Ended December 31, 2020
(in thousands)	Commercial Real Estate- Land and Construction			Commercial Real Estate- Improved Property			Commercial & Industrial			Residential Real Estate			Home Equity			Consumer			Deposit Overdraft			Total
Balance at beginning of year:
Allowance for credit    losses - loans	$	4,949		$	20,293		$	14,116		$	4,311		$	4,422		$	2,951		$	1,387		$	52,429
Allowance for credit    losses - loan commitments		235			22			311			15			250			41			—			874
Total beginning allowance for credit    losses - loans and loan    commitments		5,184			20,315			14,427			4,326			4,672			2,992			1,387			53,303
Impact of adopting ASC 326		1,524			13,078			22,357			5,630			(3,936	)		2,576			213			41,442
Provision for credit losses:
Provision for loan losses		6,929			78,210			3,918			9,065			1,234			2,980			(376	)		101,960
Provision for loan commitments		3,671			712			693			560			30			19			—			5,685
Total provision for credit    losses - loans and loan    commitments		10,600			78,922			4,611			9,625			1,264			2,999			(376	)		107,645
Charge-offs		(51	)		(1,747	)		(3,727	)		(1,415	)		(969	)		(3,615	)		(1,011	)		(12,535	)
Recoveries		92			796			1,457			640			501			1,574			426			5,486
Net recoveries (charge-offs)		41			(951	)		(2,270	)		(775	)		(468	)		(2,041	)		(585	)		(7,049	)
Balance at end of period:
Allowance for credit    losses - loans		10,841			110,652			37,850			17,851			1,487			6,507			639			185,827
Allowance for credit    losses - loan commitments		6,508			712			1,275			955			45			19			—			9,514
Total ending allowance for credit    losses - loans and loan    commitments	$	17,349		$	111,364		$	39,125		$	18,806		$	1,532		$	6,526		$	639		$	195,341

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	For the Year Ended December 31, 2019
(in thousands)	Commercial Real Estate- Land and Construction			Commercial Real Estate- Improved Property			Commercial & Industrial			Residential Real Estate			Home Equity			Consumer			Deposit Overdraft			Total
Balance at beginning of year:
Allowance for loan losses	$	4,039		$	20,848		$	12,114		$	3,822		$	4,356		$	2,797		$	972		$	48,948
Allowance for loan commitments		169			33			262			12			226			39			—			741
Total beginning allowance for credit losses		4,208			20,881			12,376			3,834			4,582			2,836			972			49,689
Provision for credit losses:
Provision for loan losses		746			2,560			2,714			1,400			851			1,130			1,664			11,065
Provision for loan commitments		66			(11	)		49			3			24			2			—			133
Total provision for credit losses		812			2,549			2,763			1,403			875			1,132			1,664			11,198
Charge-offs		(107	)		(3,867	)		(1,816	)		(1,276	)		(1,213	)		(2,719	)		(1,659	)		(12,657	)
Recoveries		271			752			1,104			365			428			1,743			410			5,073
Net recoveries (charge-offs)		164			(3,115	)		(712	)		(911	)		(785	)		(976	)		(1,249	)		(7,584	)
Balance at end of period:
Allowance for loan losses		4,949			20,293			14,116			4,311			4,422			2,951			1,387			52,429
Allowance for loan commitments		235			22			311			15			250			41			—			874
Total ending allowance for credit losses	$	5,184		$	20,315		$	14,427		$	4,326		$	4,672		$	2,992		$	1,387		$	53,303

	For the Year Ended December 31, 2018
(in thousands)	Commercial Real Estate- Land and Construction			Commercial Real Estate- Improved Property			Commercial & Industrial			Residential Real Estate			Home Equity			Consumer			Deposit Overdraft			Total
Balance at beginning of year:
Allowance for loan losses	$	3,117		$	21,166		$	9,414		$	3,206		$	4,497		$	3,063		$	821		$	45,284
Allowance for loan commitments		119			26			173			7			212			37			—			574
Total beginning allowance for credit losses		3,236			21,192			9,587			3,213			4,709			3,100			821			45,858
Provision for credit losses:
Provision for loan losses		650			(521	)		3,430			1,612			138			1,142			1,146			7,597
Provision for loan commitments		50			7			89			5			14			2			—			167
Total provision for credit losses		700			(514	)		3,519			1,617			152			1,144			1,146			7,764
Charge-offs		(137	)		(1,090	)		(1,830	)		(1,435	)		(1,193	)		(3,508	)		(1,374	)		(10,567	)
Recoveries		409			1,293			1,100			439			914			2,100			379			6,634
Net recoveries (charge-offs)		272			203			(730	)		(996	)		(279	)		(1,408	)		(995	)		(3,933	)
Balance at end of period:
Allowance for loan losses		4,039			20,848			12,114			3,822			4,356			2,797			972			48,948
Allowance for loan commitments		169			33			262			12			226			39			—			741
Total ending allowance for credit losses	$	4,208		$	20,881		$	12,376		$	3,834		$	4,582		$	2,836		$	972		$	49,689

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The following tables present the allowance for credit losses and recorded investments in loans by category, as of each period-end:

	Allowance for Credit Losses and Recorded Investment in Loans
(in thousands)	Commercial Real Estate- Land and Construction		Commercial Real Estate- Improved Property		Commercial and Industrial		Residential Real Estate		Home Equity		Consumer		Deposit Overdrafts		Total
December 31, 2020
Allowance for credit losses:
Loans individually-evaluated	$	602	$	4,196	$	1,484	$	—	$	—	$	—	$	—	$	6,282
Loans collectively-evaluated		10,239		106,456		36,366		17,851		1,487		6,507		639		179,545
Loan commitments		6,508		712		1,275		955		45		19		—		9,514
Total allowance for credit    losses - loans and commitments	$	17,349	$	111,364	$	39,125	$	18,806	$	1,532	$	6,526	$	639	$	195,341
Portfolio loans:
Individually-evaluated for credit    losses(1)	$	1,455	$	40,372	$	2,863	$	—	$	—	$	—	$	—	$	44,690
Collectively-evaluated for credit    losses		666,822		4,996,743		2,404,575		1,720,961		646,387		309,055		—		10,744,543
Total portfolio loans	$	668,277	$	5,037,115	$	2,407,438	$	1,720,961	$	646,387	$	309,055	$	—	$	10,789,233
December 31, 2019
Allowance for credit losses:
Allowance for loans individually    evaluated for impairment	$	—	$	93	$	10	$	14	$	6	$	1	$	—	$	124
Allowance for loans collectively    evaluated for impairment		4,949		20,200		14,106		4,297		4,416		2,950		1,387		52,305
Allowance for loan commitments		235		22		311		15		250		41		-		874
Total allowance for credit losses	$	5,184	$	20,315	$	14,427	$	4,326	$	4,672	$	2,992	$	1,387	$	53,303
Portfolio loans:
Individually evaluated for impairment (1)	$	—	$	3,907	$	11,961	$	4,392	$	704	$	53	$	—	$	21,017
Collectively evaluated for impairment		777,033		4,935,383		1,631,855		1,865,151		648,221		374,812		—		10,232,455
Acquired with deteriorated credit quality		118		8,567		883		4,104		753		88		—		14,513
Total portfolio loans	$	777,151	$	4,947,857	$	1,644,699	$	1,873,647	$	649,678	$	374,953	$	—	$	10,267,985

(1) Commercial loans greater than $1 million that are reported as non-accrual or as a TDR are individually evaluated due to differences in risk factors.

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 or guarantees.

Commercial real estate – land and construction consists of loans to finance investments in vacant land, land development, construction of residential housing, and construction of commercial buildings.  Commercial real estate – improved property consists of loans for the purchase or refinance of all types of improved owner-occupied and investment properties.  Factors that are considered in assigning the risk grade vary depending on the type of property financed.  The risk grade assigned to construction and development loans is based on the overall viability of the project, the experience and financial capacity of the developer or builder to successfully complete the project, project specific and market absorption rates and comparable property values, and the amount of pre-sales for residential housing construction or pre-leases for commercial investment property.  The risk grade assigned to commercial investment property loans is based primarily on the adequacy of the net operating income generated by the property to service the debt (“debt service coverage”), the loan to appraised value, the type, quality, industry and mix of tenants, and the terms of leases.  The risk grade assigned to owner-occupied commercial real estate is based primarily on global debt service coverage and the leverage of the business, but may also consider the industry in which the business operates, the business’ specific competitive advantages or disadvantages, collateral margins and the quality and experience of management.  

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Commercial and industrial (“C&I”) loans consist of revolving lines of credit to finance accounts receivable, inventory and other general business purposes; term loans to finance fixed assets other than real estate, and letters of credit to support trade, insurance or governmental requirements for a variety of businesses.  Most C&I borrowers are privately-held companies with annual sales up to $100 million. Primary factors that are considered in risk rating C&I loans include debt service coverage and leverage.  Other factors including operating trends, collateral coverage along with management experience are also considered.

Pass loans are those that exhibit a history of positive financial results that are at least comparable to the average for their industry or type of real estate.  The primary source of repayment is acceptable and these loans are expected to perform satisfactorily during most economic cycles.  Pass loans typically have no significant external factors that are expected to adversely affect these borrowers more than others in the same industry or property type.  Any minor unfavorable characteristics of these loans are outweighed or mitigated by other positive factors including but not limited to adequate secondary or tertiary sources of repayment.

Criticized loans, considered as compromised, have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank's credit position at some future date. Criticized loans are not adversely classified by the banking regulators and do not expose the bank to sufficient risk to warrant adverse classification.

Classified loans, considered as substandard and doubtful, are equivalent to the classifications used by banking regulators.  Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.  These loans may or may not be reported as non-accrual.  Doubtful loans have all the weaknesses inherent in those classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. These loans are reported as non-accrual.

The following tables summarize commercial loans by their assigned risk grade:

	Commercial Loans by Internally Assigned Risk Grade
(in thousands)	Commercial Real Estate- Land and Construction		Commercial Real Estate- Improved Property		Commercial & Industrial		Total Commercial Loans
As of December 31, 2020
Pass	$	657,435	$	4,609,726	$	2,350,724	$	7,617,885
Criticized—compromised		7,397		320,301		34,597		362,295
Classified—substandard		3,445		107,088		22,117		132,650
Classified—doubtful		—		—		—		—
Total	$	668,277	$	5,037,115	$	2,407,438	$	8,112,830
As of December 31, 2019
Pass	$	769,537	$	4,807,003	$	1,570,689	$	7,147,229
Criticized—compromised		4,338		65,612		49,009		118,959
Classified—substandard		3,276		75,242		13,231		91,749
Classified—doubtful		—		—		11,770		11,770
Total	$	777,151	$	4,947,857	$	1,644,699	$	7,369,707

Residential real estate, home equity and consumer loans are not assigned internal risk grades other than as required by regulatory guidelines that are based primarily on the age of past due loans. Wesbanco primarily evaluates the credit quality of residential real estate, home equity and consumer loans based on repayment performance and historical loss rates. The aggregate amount of residential real estate, home equity and consumer loans classified as substandard in accordance with regulatory guidelines were $27.7 million at December 31, 2020 and $28.3 million at December 31, 2019, of which $4.1 million and $5.1 million were accruing, for each period, respectively. The aggregate amount of residential real estate, home equity and consumer loans classified as substandard, as well as $28.7 million and $15.6 million of unfunded commercial loan commitments are not included in the tables above for December 31, 2020 and 2019, respectively.

Acquired OLBK Loans —In conjunction with the OLBK acquisition, Wesbanco acquired loans with a book value of $2,570.0 million as of November 22, 2019. These loans were recorded at the preliminary fair value of $2,514.1 million, with $2,544.4 million categorized as ASC 310-20 loans, of which $56.6 million of loans were sold during the first quarter of 2020 for $36.4 million.  For the loans sold, the acquisition date fair value was adjusted to the sale price resulting in no recognized gain or loss. The fair market value adjustment on these retained loans of $28.9 million at acquisition date will be recognized into interest income on a level yield basis over the remaining expected life

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of the loans.  Loans acquired with deteriorated credit quality (ASC 310-30) with a book value of $25.6  million were recorded at a fair value of $18.7 million, of which $4.0 million were accounted for under the cost recovery method as cash flows could not be reasonably estimated, and therefore they are categorized as non-accrual.  Upon adoption of CECL on January 1, 2020, $6.1 million of credit mark on OLBK PCD loans was reclassified to allowance for credit losses.  At December 31, 2020, the remaining allowance for credit losses on individually analyzed OLBK-acquired loans was $5.5 million. The carrying amount of loans acquired with deteriorated credit quality at December 31, 2020 was $18.4  million, while the outstanding customer balance was $18.7  million, and included $1.4 million of non-performing loans.

Acquired FFKT Loans —In conjunction with the FFKT acquisition, Wesbanco acquired loans with a book value of $1,064.8 million as of August 20, 2018. These loans were recorded at the preliminary fair value of $1,025.8 million, with $988.3 million categorized as ASC 310-20 loans. The fair market value adjustment on these loans of $26.0 million at the acquisition date will be recognized into interest income on a level yield basis over the remaining expected life of the loans.  Loans acquired with deteriorated credit quality with a book value of $5.3 million were recorded at a fair value of $4.6 million, of which $2.4 million were accounted for under the cost recovery method in accordance with ASC 310-30 as cash flows cannot be reasonably estimated, and categorized as non-accrual.  At December 31, 2020, the remaining allowance for credit losses on individually analyzed FFKT-acquired loans was $0.3 million. The carrying amount of loans acquired with deteriorated credit quality at December 31, 2020 was $2.4 million, while the outstanding customer balance was $2.8 million, and included $0.3 million of non-performing loans.   Certain acquired underperforming loans with an acquired book value of $45.2 million were sold during the fourth quarter of 2018 for $32.9 million. The acquisition date fair value of the acquired loans was adjusted to the sale price resulting in no recognized gain or loss.

Acquired FTSB Loans – In conjunction with the FTSB acquisition, Wesbanco acquired loans with a book value of $465.9 million as of April 5, 2018.  These loans were recorded at the fair value of $447.3 million, with $429.3 million categorized as ASC 310-20 loans.  The fair market value adjustment on these loans of $9.7 million at acquisition date will be recognized into interest income on a level yield basis over the remaining expected life of the loans.  Loans acquired with deteriorated credit quality with a book value of $5.1 million were recorded at a fair value of $2.3 million, of which $0.7 million were accounted for under the cost recovery method in accordance with ASC 310-30 as cash flows cannot be reasonably estimated, and categorized as non-accrual.    Upon adoption of CECL on January 1, 2020, $0.6 million of credit mark on FTSB PCD loans was reclassified to allowance for credit losses. At December 31, 2020, the remaining allowance for credit losses on individually analyzed FTSB-acquired loans was $0.5 million. The carrying amount of loans acquired with deteriorated credit quality at December 31, 2020 was $0.9 million, while the outstanding customer balance was $1.0 million, and included $0.2 million of non-performing loans. Certain acquired underperforming loans with an acquired book value of $21.7 million were sold during the second and fourth quarters of 2018 for $15.7 million. The acquisition date fair value of the acquired loans was adjusted to the sale price resulting in no recognized gain or loss.

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The following tables summarize the age analysis of all categories of loans.

	Age Analysis of Loans
(in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans		90 Days or More Past Due and Accruing (1)
As of December 31, 2020
Commercial real estate:
Land and construction	$	664,990	$	582	$	2,276	$	429	$	3,287	$	668,277	$	288
Improved property		5,016,812		4,876		4,118		11,309		20,303		5,037,115		2,713
Total commercial real estate		5,681,802		5,458		6,394		11,738		23,590		5,705,392		3,001
Commercial and industrial		2,395,844		4,372		2,197		5,025		11,594		2,407,438		1,899
Residential real estate		1,698,636		2,614		5,654		14,057		22,325		1,720,961		2,863
Home equity		639,319		2,414		775		3,879		7,068		646,387		706
Consumer		305,483		1,998		1,031		543		3,572		309,055		377
Total portfolio loans		10,721,084		16,856		16,051		35,242		68,149		10,789,233		8,846
Loans held for sale		168,378		—		—		—		—		168,378		—
Total loans	$	10,889,462	$	16,856	$	16,051	$	35,242	$	68,149	$	10,957,611	$	8,846
Nonperforming loans included above are as follows:
Non-accrual loans	$	9,560	$	630	$	466	$	26,224		27,320	$	36,880
TDRs accruing interest (1)		3,540		63		152		172		387		3,927
Total non-performing	$	13,100	$	693	$	618	$	26,396	$	27,707	$	40,807
As of December 31, 2019
Commercial real estate:
Land and construction	$	776,153	$	529	$	121	$	348	$	998	$	777,151	$	26
Improved property		4,921,721		10,207		5,639		10,290		26,136		4,947,857		4,709
Total commercial real estate		5,697,874		10,736		5,760		10,638		27,134		5,725,008		4,735
Commercial and industrial		1,635,232		2,519		2,813		4,135		9,467		1,644,699		1,793
Residential real estate		1,850,806		4,421		5,372		13,048		22,841		1,873,647		3,643
Home equity		641,026		3,323		621		4,708		8,652		649,678		985
Consumer		370,934		2,537		965		517		4,019		374,953		457
Total portfolio loans		10,195,872		23,536		15,531		33,046		72,113		10,267,985		11,613
Loans held for sale		43,013		—		—		—		—		43,013		—
Total loans	$	10,238,885	$	23,536	$	15,531	$	33,046	$	72,113	$	10,310,998	$	11,613
Impaired loans included above are as follows:
Non-accrual loans	$	21,061	$	897	$	1,559	$	21,396		23,852	$	44,913
TDRs accruing interest (1)		5,113		151		130		37		318		5,431
Total impaired	$	26,174	$	1,048	$	1,689	$	21,433	$	24,170	$	50,344

(1) Loans 90 days or more past due and accruing interest exclude TDRs 90 days or more past due and accruing interest.

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The following tables summarize nonperforming loans:

	Nonperforming Loans
	December 31, 2020						December 31, 2019
(in thousands)	Unpaid Principal Balance (1)		Recorded Investment		Related Allowance		Unpaid Principal Balance (1)		Recorded Investment		Related Allowance
With no related specific allowance recorded:
Commercial real estate:
Land and construction	$	469	$	469	$	—	$	616	$	580	$	—
Improved property		9,597		8,055	—			5,097		4,229	—
Commercial and industrial		4,401		3,413	—			15,182		14,313	—
Residential real estate		23,055		20,704	—			17,753		15,952	—
Home equity		6,635		5,708	—			6,523		5,610	—
Consumer		602		364	—			546		413	—
Total nonperforming loans without a specific allowance		44,759		38,713		—		45,717		41,097	—
With a specific allowance recorded:
Commercial real estate:
Land and construction	—		—		—		—		—		—
Improved property		2,094		2,094		136		4,207		3,907		93
Commercial and industrial	—		—		—			193		191		10
Residential real estate	—		—		—			4,772		4,392		14
Home equity	—		—		—			724		704		6
Consumer	—		—		—			104		53		1
Total nonperforming loans with a specific allowance		2,094		2,094		136		10,000		9,247		124
Total nonperforming loans	$	46,853	$	40,807	$	136	$	55,717	$	50,344	$	124

(1) The difference between the unpaid principal balance and the recorded investment generally reflects amounts that have been previously charged-off and fair market value adjustments on acquired nonperforming loans.

	Nonperforming Loans
	For the Year Ended December 31, 2020				For the Year Ended December 31, 2019				For the Year Ended December 31, 2018
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related specific allowance recorded:
Commercial real estate:
Land and construction	$	571	$	—	$	343	$	—	$	208	$	—
Improved property		7,193		61		7,216		84		10,658		381
Commercial and industrial		5,256		7		5,207		15		3,076		12
Residential real estate		19,651		168		14,192		211		19,026		240
Home equity		5,806		22		4,930		28		5,005		25
Consumer		377		2		423		3		808		7
Total nonperforming loans without a specific allowance		38,854		260		32,311		341		38,781		665
With a specific allowance recorded:
Commercial real estate:
Land and construction		—		—		—		—		—		—
Improved property		2,672		—		3,317		—		842		—
Commercial and industrial		38		—		175		—		—		—
Residential real estate		878		—		3,811		—		—		—
Home equity		141		—		634		—		—		—
Consumer		11		—		58		—		—		—
Total nonperforming loans with a specific allowance		3,740		—		7,995		—		842		—
Total nonperforming loans	$	42,594	$	260	$	40,306	$	341	$	39,623	$	665

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The following tables present the recorded investment in non-accrual loans and TDRs:

	Non-accrual Loans (1)
(in thousands)	December 31, 2020		December 31, 2019
Commercial real estate:
Land and construction	$	469	$	580
Improved property		9,494		6,815
Total commercial real estate		9,963		7,395
Commercial and industrial		3,302		14,313
Residential real estate		17,925		16,867
Home equity		5,345		5,903
Consumer		345		435
Total	$	36,880	$	44,913

(1) At December 31, 2020, there was one borrower with a loan balance greater than $1.0 million totaling $2.1 million, as compared to two borrowers with a loan balance greater than $1.0 million totaling $14.2 million at December 31, 2019. Total non-accrual loans include loans that are also restructured. Such loans are also set forth in the following table as non-accrual TDRs.

	TDRs
	December 31, 2020						December 31, 2019
(in thousands)	Accruing		Non-Accrual		Total		Accruing		Non-Accrual		Total
Commercial real estate:
Land and construction	$	—	$	—	$	—	$	—	$	—	$	—
Improved property		655		165		820		1,321		191		1,512
Total commercial real estate		655		165		820		1,321		191		1,512
Commercial and industrial		111		—		111		191		—		191
Residential real estate		2,779		1,354		4,133		3,477		909		4,386
Home equity		363		300		663		411		293		704
Consumer		19		9		28		31		29		60
Total	$	3,927	$	1,828	$	5,755	$	5,431	$	1,422	$	6,853

As of December 31, 2020 and December 31, 2019, there were no TDRs greater than $1.0 million. The concessions granted in the majority of loans reported as accruing and non-accrual TDRs are extensions of the maturity date or the amortization period, reductions in the interest rate below the prevailing market rate for loans with comparable characteristics, and/or permitting interest-only payments for longer than six months. Wesbanco had unfunded commitments to debtors whose loans were classified as impaired of $0.9 million and $3.3 million as of December 31, 2020 and 2019, respectively.

The following table presents details related to loans identified as TDRs during the years ended December 31, 2020 and 2019:

	New TDRs (1) For the Year Ended December 31, 2020						New TDRs (1) For the Year Ended December 31, 2019
(dollars in thousands)	Number of Modifications		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Modifications		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate:
Land and construction		—	$	—	$	—		—	$	—	$	—
Improved property		—		—		—		1		610		603
Total commercial real estate		—		—		—		1		610		603
Commercial and industrial		—		—		—		2		57		48
Residential real estate		3		360		350		4		194		177
Home equity		4		93		86		2		187		181
Consumer		1		7		7		2		45		28
Total		8	$	460	$	443		11	$	1,093	$	1,037

(1) Excludes loans that were either paid off or charged-off by period end. The pre-modification balance represents the balance outstanding at the beginning of the period. The post-modification balance represents the outstanding balance at period end.

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The following table summarizes TDRs which defaulted (defined as past due 90 days) during the years ended December 31, 2020 and 2019 that were restructured within the last twelve months prior to December 31, 2020 and 2019:

	Defaulted TDRs (1) For the Year Ended December 31, 2020				Defaulted TDRs (1) For the Year Ended December 31, 2019
(dollars in thousands)	Number of Defaults		Recorded Investment		Number of Defaults		Recorded Investment
Commercial real estate:
Land and construction		—	$	—		—	$	—
Improved property		—		—		—		—
Total commercial real estate		—		—		—		—
Commercial and industrial		—		—		—		—
Residential real estate		1		155		1		95
Home equity		—		—		1		97
Consumer		—		—		1		12
Total		1	$	155		3	$	204

(1) Excludes loans that were either charged-off or cured by period end. The recorded investment is as of December 31, 2020 and 2019.

TDRs that default are placed on non-accrual status unless they are both well-secured and in the process of collection. The loans in the table above were not accruing interest.

Section 4013 of the CARES Act allows financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. These customers must meet certain criteria, such as they were in good standing and not more than 30 days past due either as of December 31, 2019, or as of the implementation of the modification program under the Interagency Statement, as well as other requirements noted in the regulatory agencies’ revised statement. Based on this guidance, Wesbanco does not classify the COVID-19 loan modifications as TDRs, nor are the customers considered past due with regards to their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. Under the CARES Act, Wesbanco has modified approximately 3,553 loans totaling $2.2 billion, of which $0.2 billion remain in their deferral period as of December 31, 2020. Wesbanco originally offered three to six months of deferred payments to commercial and retail customers impacted by the COVID-19 pandemic depending on the type of loan and the industry for commercial loans. In the fourth quarter, Wesbanco offered up to an additional twelve months of deferred payments to certain commercial loan customers, predominantly in the hospitality industry, based on specific criteria related to the borrower, the underlying property and the potential for guarantors / co-borrowers.  

The following table summarizes the recognition of interest income on nonperforming loans:

	For the years ended December 31,
(in thousands)	2020		2019		2018
Average nonperforming loans	$	42,594	$	40,306	$	39,623
Amount of contractual interest income on nonperforming loans		2,827		3,047		2,631
Amount of interest income recognized on nonperforming loans		260		341		665

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The following table summarizes amortized cost basis loan balances by year of origination and credit quality indicator.

	Loans As of December 31, 2020
	Amortized Cost Basis by Origination Year
(unaudited, in thousands)	2020			2019			2018			2017			2016			Prior			Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term			Total
Commercial real estate: land and construction
Risk rating:
Pass	$	133,720		$	314,614		$	109,232		$	27,483		$	16,404		$	29,685		$	26,297		$	—		$	657,435
Criticized - compromised		459			—			1,532			233			79			3,778			1,316			—			7,397
Classified - substandard		—			—			403			58			291			2,693			—			—			3,445
Classified - doubtful		—			—			—			—			—			—			—			—			—
Total commercial real estate: land and construction	$	134,179		$	314,614		$	111,167		$	27,774		$	16,774		$	36,156		$	27,613		$	—		$	668,277
Current-period net charge-offs	$	—		$	—		$	—		$	61		$	(50	)	$	30		$	—		$	—		$	41
Commercial real estate: improved property
Risk rating:
Pass	$	809,516		$	670,554		$	646,629		$	474,622		$	572,733		$	1,346,552		$	89,120		$	—		$	4,609,726
Criticized - compromised		2,693			67,261			16,793			59,251			42,284			130,247			1,772			—			320,301
Classified - substandard		102			16,366			4,946			11,647			18,460			55,567			—			—			107,088
Classified - doubtful		—			—			—			—			—			—			—			—			—
Total commercial real estate: improved property	$	812,311		$	754,181		$	668,368		$	545,520		$	633,477		$	1,532,366		$	90,892		$	—		$	5,037,115
Current-period net charge-offs	$	—		$	—		$	(38	)	$	13		$	(1,617	)	$	691		$	—		$	—		$	(951	)
Commercial and industrial
Risk rating:
Pass	$	977,085		$	240,262		$	193,712		$	160,924		$	85,379		$	265,890		$	427,336		$	136		$	2,350,724
Criticized - compromised		453			2,726			4,206			2,795			324			11,640			12,453			—			34,597
Classified - substandard		—			3,817			1,947			3,771			1,603			5,073			5,906			—			22,117
Classified - doubtful		—			—			—			—			—			—			—			—			—
Total commercial and industrial	$	977,538		$	246,805		$	199,865		$	167,490		$	87,306		$	282,603		$	445,695		$	136		$	2,407,438
Current-period net charge-offs	$	—		$	(50	)	$	(1,843	)	$	(272	)	$	(108	)	$	303		$	(300	)	$	—		$	(2,270	)
Residential real estate
Loan delinquency:
Current	$	385,541		$	242,770		$	149,603		$	108,090		$	170,967		$	641,665		$	—		$	—		$	1,698,636
30-59 days past due		—			—			320			533			—			1,761			—			—			2,614
60-89 days past due		—			—			823			—			185			4,646			—			—			5,654
90 days or more past due		—			483			166			761			819			11,828			—			—			14,057
Total residential real estate	$	385,541		$	243,253		$	150,912		$	109,384		$	171,971		$	659,900		$	—		$	—		$	1,720,961
Current-period net charge-offs	$	—		$	(24	)	$	(8	)	$	(11	)	$	(110	)	$	(622	)	$	—		$	—		$	(775	)
Home equity
Loan delinquency:
Current	$	18,191		$	3,611		$	3,334		$	975		$	1,110		$	16,477		$	583,486		$	12,135		$	639,319
30-59 days past due		124			—			34			—			—			882			1,247			127			2,414
60-89 days past due		—			—			—			—			—			14			749			12			775
90 days or more past due		—			—			8			156			88			1,786			1,075			766			3,879
Total home equity	$	18,315		$	3,611		$	3,376		$	1,131		$	1,198		$	19,159		$	586,557		$	13,040		$	646,387
Current-period net charge-offs	$	—		$	—		$	(10	)	$	(2	)	$	(1	)	$	(92	)	$	(356	)	$	(7	)	$	(468	)
Consumer
Loan delinquency:
Current	$	72,847		$	89,637		$	39,584		$	22,118		$	13,144		$	45,735		$	22,253		$	165		$	305,483
30-59 days past due		481			408			210			311			194			379			15			—			1,998
60-89 days past due		273			147			84			100			163			253			11			—			1,031
90 days or more past due		113			72			73			31			12			242			—			—			543
Total consumer	$	73,714		$	90,264		$	39,951		$	22,560		$	13,513		$	46,609		$	22,279		$	165		$	309,055
Current-period net charge-offs	$	(273	)	$	(731	)	$	(589	)	$	(486	)	$	(59	)	$	97		$	—		$	—		$	(2,041	)

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The following table summarizes other real estate owned and repossessed assets included in other assets:

	December 31,
(in thousands)	2020		2019
Other real estate owned	$	504	$	4,062
Repossessed assets		45		116
Total other real estate owned and repossessed assets	$	549	$	4,178

Residential real estate included in other real estate owned at December 31, 2020 and December 31, 2019 was $0.1 million and $0.6 million, respectively. At December 31, 2020 and 2019, formal foreclosure proceedings were in process on residential real estate loans totaling $4.1 million and $8.1 million, respectively.

NOTE 6. PREMISES AND EQUIPMENT

Premises and equipment include:

	December 31,
(in thousands)	2020			2019
Land and improvements	$	62,131		$	66,609
Buildings and improvements		224,942			221,139
Furniture and equipment		106,501			102,171
Total cost		393,574			389,919
Accumulated depreciation and amortization		(200,214	)		(187,437	)
Right of use assets		56,061			58,532
Total premises and equipment, net	$	249,421		$	261,014

Depreciation and amortization expense of premises and equipment charged to operations for the years ended December 31, 2020, 2019 and 2018 was $14.1 million, $11.5 million and $10.5 million, respectively.

Operating leases are recorded as a right of use (“ROU”) asset and operating lease liability, included in premises and equipment, net and other liabilities, respectively, on the consolidated balance sheet beginning January 1, 2019 when Wesbanco adopted ASU 2016-02 (Leases-Topic 842) prospectively. Operating lease ROU assets represent the right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the lease commencement date. Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded primarily in net occupancy expense in the consolidated statements of comprehensive income. Wesbanco initially capitalized $20 million upon adoption for right-of-use assets and lease liabilities, net of existing straight-line lease liabilities and unfavorable acquired lease liabilities.

Operating leases relate primarily to bank branches, office space and license agreements with remaining lease terms of generally 1 to 30 years, which include options for multiple five- and ten- year extensions, with a weighted-average lease term of 15.7 years. As of December 31, 2020, operating lease ROU assets and liabilities were $51.5 million and $56.0 million, respectively, and as of December 31, 2019, operating lease ROU assets and liabilities were $53.6 million and $56.5 million, respectively, of which $37.2 million of operating ROU assets and liabilities were acquired from OLBK. The lease expense for operating leases was $5.8 million, $5.4 million and $4.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. The weighted average discount rate was 2.81% as of December 31, 2020.

Finance leases relate primarily to bank branches and office space with remaining lease terms of generally 5 to 20 years, which include options for multiple five-and ten-year extensions, with weighted-average lease terms of 13.5 years. As of December 31, 2020, the finance lease ROU assets and liabilities were $4.5 million and $5.2 million, respectively and were $5.0 million and $5.6 million, respectively, as of December 31, 2019. The weighted average discount rate was 3.78% and 3.77% as of December 31, 2020 and 2019, respectively. Amortization cost related to finance lease ROU assets was $0.4 million for each of the years ended December 31, 2020, 2019 and 2018, respectively. Interest expense related to finance lease ROU assets was $0.2 million for each of the years ended December 31, 2020, 2019 and 2018, respectively.

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Future minimum lease payments under non-cancellable leases with initial or remaining lease terms in excess of one year at December 31, 2020 are as follows (in thousands):

Year	Operating Leases			Finance Leases			Total
2021	$	6,358		$	855		$	7,213
2022		5,566			873			6,439
2023		5,010			885			5,895
2024		4,526			890			5,416
2025		4,365			861			5,226
2026 and thereafter		45,676			3,778			49,454
Total lease payments	$	71,501		$	8,142		$	79,643
Less: capitalized interest		(15,465	)		(2,962	)		(18,427	)
Present value of lease liabilities	$	56,036		$	5,180		$	61,216

NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS

Wesbanco’s Consolidated Balance Sheets include goodwill of $1.1 billion as of December 31, 2020 and 2019, respectively, all of which relates to the Community Banking segment. Wesbanco’s other intangible assets of $66.3 million and $80.4 million at December 31, 2020 and 2019, respectively, primarily consist of core deposit and other customer list intangibles, which have finite lives and are amortized using straight line and accelerated methods. Wesbanco recognized $231.8 million in goodwill and $32.9 million in core deposit intangibles in connection with the OLBK acquisition. Other intangible assets are being amortized over estimated useful lives ranging from ten to sixteen years. Amortization of core deposit and customer list intangible assets totaled $13.4 million, $10.1 million and $6.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Wesbanco completed its annual goodwill impairment evaluation as of November 30, 2020 and determined that goodwill was not impaired as of such date as well as at December 31, 2020, as there were no significant changes in market conditions, consolidated operating results, or forecasted future results from November 30, 2020. Additionally, there were no events or changes in circumstances indicating impairment of other intangible assets as of December 31, 2020.

The following table shows Wesbanco’s capitalized other intangible assets and related accumulated amortization:

	December 31,
(in thousands)	2020			2019
Other intangible assets:
Gross carrying amount	$	118,495		$	119,387
Accumulated amortization		(52,166	)		(38,954	)
Net carrying amount of other intangible assets	$	66,329		$	80,433

The following table shows the amortization on Wesbanco’s other intangible assets for each of the next five years (in thousands):

Year	Amount
2021	$	11,457
2022		10,278
2023		9,088
2024		8,251
2025		7,475
2026 and thereafter		19,780
Total	$	66,329

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NOTE 8. INVESTMENTS IN LIMITED PARTNERSHIPS

Wesbanco is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved low-income housing investment tax credit projects. These investments are accounted for using the equity method of accounting and are included in other assets in the Consolidated Balance Sheets. The limited partnerships are considered to be VIEs as they generally do not have equity investors with voting rights or have equity investors that do not provide sufficient financial resources to support their activities. The VIEs have not been consolidated because Wesbanco is not considered the primary beneficiary. All of Wesbanco’s investments in limited partnerships are privately held, and their market values are not readily available. At December 31, 2020 and 2019, Wesbanco had $31.4 million and $25.7 million, respectively, invested in these partnerships. Wesbanco also recognizes the unconditional unfunded equity commitments of $19.9 million and $15.6 million at December 31, 2020 and 2019, respectively, in other liabilities.  Wesbanco classifies the amortization of the investment as a component of income tax expense (benefit) and proportionally amortizes the investment over the tax credit period. The amount for the years ended December 31, 2020, 2019 and 2018 was $3.3 million, $2.6 million and $2.1 million, respectively. Tax benefits attributed to these partnerships include low-income housing and historic tax credits which totaled $3.2 million, $2.5 million and $2.1 million for the years ended December 31, 2020, 2019 and 2018, respectively, which are also included in income tax expense.

Wesbanco is also a limited partner in seven other limited partnerships, which provide seed money and capital to startup companies, and financing to low-income housing projects. At December 31, 2020 and 2019, Wesbanco had $5.8 million and $7.1 million, respectively, invested in these partnerships, which are recorded in other assets using the equity method. Wesbanco included in operations under the equity method of accounting its share of the partnerships’ net (expense) income of $(603) thousand, $618 thousand and $712 thousand for the years ended December 31, 2020, 2019 and 2018, respectively.

NOTE 9. CERTIFICATES OF DEPOSIT

Certificates of deposit in denominations of $100 thousand or more were $843.2 million and $1.2 billion as of December 31, 2020 and 2019, respectively. Interest expense on certificates of deposit of $100 thousand or more was $6.4 million, $8.0 million and $8.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

At December 31, 2020, the scheduled maturities of total certificates of deposit are as follows (in thousands):

Year	Amount
2021	$	1,000,380
2022		266,077
2023		134,647
2024		91,984
2025		67,226
2026 and thereafter		58,196
Total	$	1,618,510

NOTE 10. FHLB AND OTHER SHORT-TERM BORROWINGS

Wesbanco is a member of the FHLB system. Wesbanco’s FHLB borrowings, which consist of borrowings from the FHLB of Pittsburgh are secured by a blanket lien by the FHLB on certain residential mortgages and other loan types or securities with a market value in excess of the outstanding balances of the borrowings. At December 31, 2020 and 2019, Wesbanco had FHLB borrowings of $0.5 billion and $1.4 billion, respectively, with a remaining weighted-average interest rate of 2.05% and 2.27%, respectively. The terms of the security agreement with the FHLB include a specific assignment of collateral that requires the maintenance of qualifying mortgage and other types of loans as pledged collateral with unpaid principal amounts in excess of the FHLB advances, when discounted at certain pre-established percentages of the loans’ unpaid principal balances. FHLB stock owned by Wesbanco totaling $34.0 million and $66.8 million at December 31, 2020 and 2019, respectively, is also pledged as collateral on these advances. The remaining maximum borrowing capacity by Wesbanco with the FHLB at December 31, 2020 and 2019 was estimated to be approximately $4.1 billion and $3.2 billion, respectively.

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The following table presents the aggregate annual maturities and weighted-average interest rates of FHLB borrowings at December 31, 2020 based on their contractual maturity dates and interest rates (dollars in thousands):

Year	Scheduled Maturity		Weighted Average Rate
2021	$	365,002		2.44	%
2022		128,050		1.33	%
2023		55,000		1.17	%
2024		—		—
2025		882		1.45	%
2026 and thereafter		69		2.89	%
Total	$	549,003		2.05	%

Other short-term borrowings of $242.0 million and $282.4 million at December 31, 2020 and 2019, respectively, can consist in the aggregate of securities sold under agreements to repurchase, federal funds purchased, and outstanding borrowings on a revolving line of credit. At December 31, 2020 and 2019, securities sold under agreements to repurchase were $242.0 million and $274.9 million, respectively, with a weighted average interest rate during the year of 0.60% and 2.10%, respectively. There were no federal funds purchased outstanding at December 31, 2020. There were $7.5 million in federal funds purchased outstanding as of December 31, 2019, with an interest rate of 1.55%.

In August 2020, Wesbanco renewed a revolving line of credit, which is a senior obligation of the parent company with another financial institution. This line of credit, which accrues interest at an adjusted LIBOR rate, provides for aggregate unsecured borrowings of up to $30.0 million. There were no outstanding balances as of either December 31, 2020 or 2019.

NOTE 11. SUBORDINATED DEBT AND JUNIOR SUBORDINATED DEBT

Wesbanco had $60.1 million of subordinated debt outstanding at December 31, 2020. YCB, acquired by Wesbanco in 2016 and OLBK, acquired by Wesbanco in 2019, issued $25.0 million and $35.1 million in subordinated debt, respectively. The YCB notes were issued at a fixed rate of 6.25%, mature on December 15, 2025, and became callable on December 15, 2020.  Beginning on the call date, the interest rate became a variable rate equal to 3-month LIBOR plus 4.59% with a current rate of 4.81%. The OLBK notes have a fixed rate of 5.625%, mature on August 15, 2026, and are callable on August 15, 2021. The interest rate will become a variable rate equal to 3-month LIBOR plus 4.502% on the call date. The YCB notes are considered Tier 2 regulatory capital for Wesbanco and Wesbanco Bank as they were initially issued by the Bank, while the OLBK notes are considered Tier 2 regulatory capital for Wesbanco.

Certain trusts, consisting of Wesbanco Capital Trust II, Wesbanco Capital Statutory Trust III, Wesbanco Capital Trusts IV, V and VI, Oak Hill Capital Trusts 2, 3 and 4, Community Bank Shares Statutory Trusts I and II and First Federal Statutory Trust II are all wholly-owned trust subsidiaries of Wesbanco formed for the purpose of issuing Trust Preferred Securities (“Trust Preferred Securities”) into a pool of other financial services entity trust preferred securities, and lending the proceeds to Wesbanco. The Trust Preferred Securities were issued and sold in private placement offerings. The proceeds from the sale of the securities and the issuance of common stock by the Trusts were invested in Junior Subordinated Deferrable Interest Debentures (“Junior Subordinated Debt”) issued by Wesbanco and former acquired banks, which are the sole assets of the Trusts. The Trusts pay dividends on the Trust Preferred Securities at the same rate as the distributions paid by Wesbanco on the Junior Subordinated Debt held by the Trusts. The Trusts provide Wesbanco with the option to defer payment of interest on the Junior Subordinated Debt for an aggregate of 20 consecutive quarterly periods. Should any of these options be utilized, Wesbanco may not declare or pay dividends on its common stock during any such period. Undertakings made by Wesbanco with respect to the Trust Preferred Securities for the Trusts constitute a full and unconditional guarantee by Wesbanco of the obligations of these Trust Preferred Securities.

The Junior Subordinated Debt is presented as a separate category of long-term debt on the Consolidated Balance Sheets. For regulatory purposes, the Federal Reserve Board has allowed bank holding companies to include trust preferred securities in Tier 1 capital up to a certain limit. Provisions in the Dodd-Frank Act require the Federal Reserve Board to generally exclude trust preferred securities from Tier 1 capital, but a grandfather provision permitted bank holding companies with consolidated assets of less than $15 billion to continue counting existing trust preferred securities as Tier 1 capital until they matured. At December 31, 2020, Wesbanco's assets were greater than $15 billion; therefore, all such securities are no longer counted as Tier 1 capital but instead are counted as Tier 2 capital subject to limits. The Trust Preferred Securities provide the issuer with a unique capital instrument that has a tax-deductible interest feature not normally associated with the equity of a corporation.

In connection with the OLBK acquisition in 2019, Wesbanco acquired Regal MD Statutory Trusts I and II, Delaware trusts established in 2003 and 2005, respectively, inherited by OLBK as part of their acquisition of Regal Bancorp. The Trusts owned Junior Subordinated Debt issued by Regal Bancorp. The trust preferred securities and junior subordinated debt were redeemed at an aggregate redemption price, excluding accrued interest, of $6.7 million in March 2020.

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The following table shows Wesbanco’s trust subsidiaries with outstanding Trust Preferred Securities as of December 31, 2020:

(in thousands)	Trust Preferred Securities		Common Securities		Junior Subordinated Debt		Stated Maturity Date	Optional Redemption Date
Wesbanco Capital Trust II (1)	$	13,000	$	410	$	13,410	6/30/2033	6/30/2008
Wesbanco Capital Statutory Trust III (2)		17,000		526		17,526	6/26/2033	6/26/2008
Wesbanco Capital Trust IV (3)		20,000		619		20,619	6/17/2034	6/17/2009
Wesbanco Capital Trust V (3)		20,000		619		20,619	6/17/2034	6/17/2009
Wesbanco Capital Trust VI (4)		15,000		464		15,464	3/17/2035	3/17/2010
Oak Hill Capital Trust 2 (5)		5,000		155		5,155	10/18/2034	10/18/2009
Oak Hill Capital Trust 3 (6)		8,000		248		8,248	10/18/2034	10/18/2009
Oak Hill Capital Trust 4 (7)		5,000		155		5,155	6/30/2035	6/30/2015
Community Bank Shares Statutory Trust I (3)		6,642		217		6,859	6/17/2034	6/17/2014
Community Bank Shares Statutory Trust II (8)		9,271		310		9,581	6/15/2036	6/15/2016
First Federal Statutory Trust II (9)		9,244		310		9,554	3/22/2037	3/15/2017
Total	$	128,157	$	4,033	$	132,190

(1) Variable rate based on the three-month LIBOR plus 3.15% with a current rate of 3.39% through March 30, 2021, adjustable quarterly. 

(2) Variable rate based on the three-month LIBOR plus 3.10% with a current rate of 3.35% through March 26, 2021, adjustable quarterly.

(3) Variable rate based on the three-month LIBOR plus 2.65 % with a current rate of 2.88 % through March 17, 2021, adjustable quarterly.

(4) Variable rate based on the three-month LIBOR plus 1.77 % with a current rate of 2.00% through March 17, 2021, adjustable quarterly.

(5) Variable rate based on the three-month LIBOR plus 2.40% with a current rate of 2.62% through January 18, 2021, adjustable quarterly.

(6) Variable rate based on the three-month LIBOR plus 2.30% with a current rate of 2.52% through January 18, 2021, adjustable quarterly.

(7) Variable rate based on the three-month LIBOR plus 1.60% with a current rate of 1.84% through March 30, 2021, adjustable quarterly.

(8) Variable rate based on the three-month LIBOR plus 1.70% with a current rate of 1.92% through March 15, 2021, adjustable quarterly.

(9) Variable rate based on the three-month LIBOR plus 1.60% with a current rate of 1.82% through March 15, 2021, adjustable quarterly.

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NOTE 12. DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives

Wesbanco is exposed to certain risks arising from both its business operations and economic conditions. Wesbanco principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. Wesbanco manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. Wesbanco’s existing interest rate derivatives result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in Wesbanco’s assets or liabilities. Wesbanco manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions. A matched book is when the Bank’s assets and liabilities are equally distributed but also have similar maturities.

Loan Swaps

Wesbanco executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously economically hedged by offsetting interest rate swaps that Wesbanco executes with a third party, such that Wesbanco minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements of ASC 815, changes in the fair value of both the customer swaps and the offsetting third-party swaps are recognized directly in earnings. As of December 31, 2020 and 2019, Wesbanco had 112 and 65, respectively, interest rate swaps with an aggregate notional amount of $649.9 million and $399.9 million, respectively, related to this program. During the years ended December 31, 2020, 2019 and 2018, Wesbanco recognized net losses of $2.0 million, $1.1 million and $0.4 million, respectively, related to the changes in fair value of these swaps. Additionally, Wesbanco recognized $8.1 million, $4.5 million and $2.1 million of income for the related swap fees for the years ended December 31, 2020, 2019 and 2018, respectively.

Risk participation agreements are entered into as financial guarantees of performance on interest rate swap derivatives. The purchased asset or sold liability allows Wesbanco to participate-in (fee received) or participate-out (fee paid) the risk associated with certain derivative positions executed by the borrower of the lead bank in a loan syndication. As of December 31, 2020 and December 31, 2019, Wesbanco had 12 and 10, respectively, risk participation-in agreements with an aggregate notional amount of $101.1 million and $96.5 million, respectively. As of December 31, 2020 and December 31, 2019, Wesbanco had one risk participation-out agreement with an aggregate notional amount of $10.0 million and $7.0 million, respectively.

Mortgage Loans Held for Sale and Loan Commitments

Certain residential mortgage loans are originated for sale in the secondary mortgage loan market. These loans are classified as held for sale and carried at fair value as Wesbanco has elected the fair value option. Fair value is determined based on rates obtained from the secondary market for loans with similar characteristics. Wesbanco sells loans to the secondary market on either a mandatory or best efforts basis. The loans sold on a mandatory basis are not committed to an investor until the loan is closed with the borrower. Wesbanco enters into forward to be announced (“TBA”) contracts to manage the interest rate risk between the loan commitment and the closing of the loan.  The total balance of forward TBA contracts entered into was $183.5 million and $50.0 million at December 31, 2020 and December 31, 2019, respectively.  Additionally, Wesbanco recognized losses of $7.4 million and $1.4 million, and a gain of $0.4 million, respectively, for the years ended December 31, 2020, 2019 and 2018, respectively, related to the changes in fair value of these contracts. The loans sold on a best efforts basis are committed to an investor simultaneous to the interest rate commitment with the borrower, and as a result, the Company does not enter into a separate forward TBA contract to offset the fair value risk as the investor accepts such risk in exchange for a lower premium on sale.

Fair Values of Derivative Instruments on the Balance Sheet

All derivatives are carried on the consolidated balance sheet at fair value. Derivative assets are classified in the consolidated balance sheet under other assets, and derivative liabilities are classified in the consolidated balance sheet under other liabilities. Changes in fair value are recognized in earnings. None of Wesbanco’s derivatives are designated in qualifying hedging relationships under ASC 815.

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The table below presents the fair value of Wesbanco’s derivative financial instruments as well as their classification on the Balance Sheet as of December 31, 2020 and December 31, 2019:

	December 31, 2020						December 31, 2019
(in thousands)	Notional or Contractual Amount		Asset Derivatives		Liability Derivatives		Notional or Contractual Amount		Asset Derivatives		Liability Derivatives
Derivatives
Loan Swaps:
Interest rate swaps	$	649,857	$	46,418	$	49,917	$	399,860	$	14,585	$	16,117
Other contracts:
Interest rate loan commitments		112,119		702		—		34,236		44		—
Forward TBA contracts		183,500		—		1,161		50,000		—		88
Total derivatives			$	47,120	$	51,078			$	14,629	$	16,205

Effect of Derivative Instruments on the Income Statement

The table below presents the change in the fair value of the Company’s derivative financial instruments reflected within the other non-interest income line item of the consolidated income statement for the years ended December 31, 2020, 2019 and 2018, respectively.

		For the Years Ended December 31,
(in thousands)	Location of Gain/(Loss)	2020			2019			2018
Interest rate swaps	Other income	$	(1,966	)	$	(1,101	)	$	(437	)
Interest rate loan commitments	Mortgage banking income		658			(81	)		125
Forward TBA contracts	Mortgage banking income		(7,442	)		(1,354	)		443
Total		$	(8,750	)	$	(2,536	)	$	131

Credit Risk Related Contingent Features

Wesbanco has agreements with its derivative counterparties that contain a provision where if Wesbanco defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Wesbanco could also be declared in default on its derivative obligations.

Wesbanco also has agreements with certain of its derivative counterparties that contain a provision where if Wesbanco fails to maintain its status as either a “well-“ or “adequately-capitalized” institution, then the counterparty could terminate the derivative positions and Wesbanco would be required to settle its obligations under the agreements.

Wesbanco has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral with a market value of $84.6 million as of December 31, 2020. If Wesbanco had breached any of these provisions at December 31, 2020, it could have been required to settle its obligations under the agreements at the termination value and would have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty.

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NOTE 13. EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plan— The Wesbanco, Inc. Defined Benefit Pension Plan (“the Plan”) established on January 1, 1985, is a non-contributory, defined benefit pension plan. The Plan covers all employees of Wesbanco and its subsidiaries who were hired on or before August 1, 2007 who satisfy minimum age and length of service requirements. Benefits of the Plan are generally based on years of service and the employee’s compensation during the last five years of employment. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. Wesbanco uses a December 31 measurement date for the Plan.

The benefit obligations and funded status of the Plan are as follows:

	December 31,
(dollars in thousands)	2020			2019
Accumulated benefit obligation at end of year	$	157,328		$	142,980
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	153,960		$	128,758
Service cost		2,283			2,248
Interest cost		4,507			5,266
Actuarial loss		14,376			22,395
Plan amendment		(313	)		—
Benefits paid		(6,380	)		(4,707	)
Projected benefit obligation at end of year	$	168,433		$	153,960
Change in fair value of plan assets:
Fair value of plan assets at beginning of year	$	167,720		$	141,108
Actual return on plan assets		24,376			28,319
Employer contribution		—			3,000
Benefits paid		(6,380	)		(4,707	)
Fair value of plan assets at end of year	$	185,716		$	167,720
Amounts recognized in the statement of financial position:
Funded status	$	17,284		$	13,760
Net amounts recognized as receivable pension costs in the    consolidated balance sheets	$	17,284		$	13,760
Amounts recognized in accumulated other comprehensive    income consist of:
Unrecognized prior service (credit) cost	$	(227	)	$	52
Unrecognized net loss		21,726			24,486
Net amounts recognized in accumulated other comprehensive    income (before tax)	$	21,499		$	24,538
Weighted average assumptions used to determine benefit obligations:
Discount rate		2.74	%		3.38	%
Rate of compensation increase		3.30	%		3.53	%
Expected long-term return on assets		6.11	%		6.30	%

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The components of and weighted-average assumptions used to determine net periodic benefit costs are as follows:

	For the Years Ended December 31,
(dollars in thousands)	2020			2019			2018
Components of net periodic benefit cost:
Service cost—benefits earned during year	$	2,283		$	2,248		$	2,835
Interest cost on projected benefit obligation		4,507			5,266			4,517
Expected return on plan assets		(10,433	)		(8,869	)		(8,939	)
Amortization of prior service (credit) cost		(34	)		26			26
Amortization of net loss		3,192			3,240			3,053
Net periodic pension (income) cost	$	(485	)	$	1,911		$	1,492
Other changes in plan assets and benefit obligations recognized in other    comprehensive income:
Net loss (gain)  for period	$	432		$	2,946		$	2,068
Prior service credit		(313	)		—			—
Unrecognized loss on merged plan		—			—			1,429
Amortization of prior service credit (cost)		34			(26	)		(26	)
Amortization of net loss		(3,192	)		(3,240	)		(3,053	)
Total recognized in other comprehensive (income) loss	$	(3,039	)	$	(320	)	$	418
Total recognized in net periodic pension cost and other comprehensive    income	$	(3,524	)	$	1,591		$	1,910
Weighted-average assumptions used to determine net periodic    pension cost:
Discount rate		3.38	%		4.48	%		3.81	%
Rate of compensation increase		3.53	%		3.62	%		3.70	%
Expected long-term return on assets		6.30	%		6.30	%		6.30	%

As permitted under ASC 715-30-35-13, the amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the Plan.

The expected long-term rate of return for the Plan’s total assets is based on the expected return of each of the Plan asset categories, weighted based on the median of the target allocation for each class.

Pension Plan Investment Policy and Strategy— The investment policy as established by the Pension and Post-Retirement Plan Committee, to be followed by the Trustee, which is Wesbanco’s Trust and Investment Services department, is to invest assets based on the target allocations shown in the table below. Assets are reallocated periodically by the Trustee based on the ranges set forth by the Retirement Plans Committee to meet the target allocations. The investment policy is also subject to review periodically to determine if the policy should be changed. Plan assets are to be invested with the principal objective of maximizing long-term total return without exposing Plan assets to undue risk, taking into account the Plan’s funding needs and benefit obligations. Assets are to be invested in a balanced portfolio composed primarily of equities, fixed income, alternative asset funds and cash or cash equivalent money market investments.

A maximum of 5% may be invested in any one stock. Foreign stocks may be included, either through direct investment or by the purchase of mutual funds, which invest in foreign stock. Wesbanco common stock can represent up to 5% of the total market value. Corporate bonds selected for purchase must be rated Baa1 by Moody’s or BBB+ by Standard and Poor’s or higher. No more than 5% shall be invested in bonds or notes issued by the same corporation with a maximum term of twenty years. There is no limit on the holdings of U.S. Treasury or Federal Agency Securities. At December 31, 2020 and 2019, the Plan’s equity securities included 55,300 shares of Wesbanco common stock with a fair market value of $1.7 million and $2.1 million, respectively.

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The following table sets forth the Plan’s weighted-average asset allocations by asset category:

	Target
	Allocation	December 31,
	for 2020	2020			2019
Asset Category:
Equity securities	55-75%		69	%		65	%
Debt securities	25-55%		28	%		31	%
Cash and cash equivalents	0-5%		3	%		4	%
Total			100	%		100	%

The fair values of Wesbanco’s pension plan assets at December 31, 2020 and 2019, by asset category are as follows:

			December 31, 2020
			Fair Value Measurements Using:
(in thousands)	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Defined benefit pension plan assets:
Registered investment companies	$	58,101	$	58,101	$	—	$	—
Equity securities		85,222		85,222		—		—
Corporate debt securities		21,170		—		21,170		—
Municipal obligations		2,382		—		2,382		—
Residential mortgage-backed securities and collateralized    mortgage obligations of government sponsored entities    and agencies		18,425		—		18,425		—
Total defined benefit pension plan assets (1)	$	185,300	$	143,323	$	41,977	$	—

(1) The defined benefit pension plan statement of net assets also includes cash, accrued interest and dividends, and due to/from brokers resulting in net assets available for benefits of $186.3 million.

			December 31, 2019
			Fair Value Measurements Using:
(in thousands)	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Defined benefit pension plan assets:
Registered investment companies	$	47,699	$	47,699	$	—	$	—
Equity securities		75,807		75,807		—		—
Corporate debt securities		16,122		—		16,122		—
Municipal obligations		3,313		—		3,313		—
Residential mortgage-backed securities and collateralized    mortgage obligations of government sponsored entities    and agencies		26,320		—		26,320		—
Total defined benefit pension plan assets (1)	$	169,261	$	123,506	$	45,755	$	—

(1) The defined benefit pension plan statement of net assets also includes cash, accrued interest and dividends, and due to/from brokers resulting in net assets available for benefits of $167.9 million.

Registered investment companies and equity securities: Valued at the closing price reported on the active market on which the individual securities are traded.

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Corporate debt securities, municipal obligations, and U.S. government sponsored entities and agency securities: Valued at fair value based on models that consider criteria such as dealer quotes, available trade data, issuer creditworthiness, market movements, sector news, and bond and swap yield curves.

Cash Flows— Wesbanco has no required minimum contribution to the Plan for 2021 and as of December 31, 2020 does not expect to make a voluntary contribution in 2021. Wesbanco contributed $3.0 million and $2.5 million for the years ended December 31, 2019 and December 31, 2018, respectively. Wesbanco did not make a contribution to the Plan in 2020.

The following table presents estimated benefits to be paid in each of the next five years and in the aggregate for the five years thereafter (in thousands):

Year	Amount
2021	$	6,105
2022		6,313
2023		6,669
2024		7,027
2025		7,416
2026 to 2030		41,262

FFKT Postretirement Medical Benefit Plan— Wesbanco assumed FFKT’s postretirement medical benefit plan upon acquisition, which had a liability totaling $15.0 million at the acquisition date. The plan covers FFKT employees who were hired before January 1, 2016 and meet certain age and length of full-time service requirements. The plan was modified in August 2018, which reduced the number of eligible employees. The modification resulted in a $5.5 million unrealized gain, which was recorded in accumulated other comprehensive income, net of tax, and will be recognized over the life of the plan participants estimated to be approximately 17 years. Benefits provided under this plan are unfunded, and payments to the plan participants are made by Wesbanco.

The benefit obligation and funded status of the plan are as follows:

	December 31,
(dollars in thousands)	2020			2019
Change in projected benefit obligation:
Projected benefit obligation	$	12,632		$	11,514
Interest cost		360			460
Actuarial loss (gain)		302			1,304
Participant contributions		353			392
Benefits paid		(952	)		(1,038	)
Projected benefit obligation at end of year	$	12,695		$	12,632
Amounts recognized in the statement of financial position:
Funded status	$	(12,695	)	$	(12,632	)
Net amounts recognized as receivable pension costs in the consolidated balance sheets	$	(12,695	)	$	(12,632	)
Amounts recognized in accumulated other comprehensive income consist of:
Unrecognized net loss	$	1,388		$	1,153
Prior service cost		(2,792	)		(3,016	)
Net amounts recognized in accumulated other comprehensive income (before tax)	$	(1,404	)	$	(1,863	)
Weighted average assumptions used to determine benefit obligations:
Discount rate		2.65	%		3.35	%
Rate of compensation increase	NA			NA
Expected long-term return on assets	NA			NA

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The components of and weighted-average assumptions used to determine net periodic benefit costs are as follows:

	For the Years Ended December 31,
(dollars in thousands)	2020			2019
Components of net periodic benefit cost:
Interest cost on projected benefit obligation	$	360		$	460
Amortization of prior service credit		(224	)		(224	)
Amortization of net loss		67			-
Net periodic pension cost	$	203		$	236
Other changes in plan benefit obligations recognized in other comprehensive income:
Prior service cost for period	$	-		$	-
Net (gain) loss for the period		302			1,304
Amortization of prior service credit		224			224
Amortization of net loss		(67	)		-
Total recognized in other comprehensive income	$	459		$	1,528
Total recognized in net periodic pension cost and other comprehensive income	$	662		$	1,764
Weighted-average assumptions used to determine net periodic pension cost:
Discount rate		1.97	%		2.96	%
Rate of compensation increase	NA			NA
Expected long-term return on assets	NA			NA

The following table presents estimated benefits to be paid in each of the next five years and in aggregate for the five years thereafter (in thousands):

Year	Amount
2021	$	599
2022		621
2023		623
2024		627
2025		616
2026 to 2030		3,011

Employee Stock Ownership and 401(k) Plan (“KSOP”) — Wesbanco sponsors a KSOP plan consisting of a non-contributory leveraged ESOP and a contributory 401(k) profit sharing plan covering substantially all of its employees. Under the provisions of the 401(k) plan, Wesbanco matches a portion of eligible employee contributions based on rates established and approved by the Board of Directors. For each of the past three years, Wesbanco matched 100 % of the first 3 % and 50 % of the next 2 % of eligible employee contributions. No ESOP contribution has been made for any of the past three years.

As of December 31, 2020, the KSOP held 483,734 shares of Wesbanco common stock of which all shares were allocated to specific employee accounts. Dividends on shares are either distributed to employee accounts or paid in cash to the participant. Total expense for the KSOP was $5.3 million, $4.4 million and $3.7 million in 2020, 2019 and 2018, respectively. Wesbanco had 246,769 and 343,107 shares registered on Form S-8 remaining for future issuance under the KSOP plan at December 31, 2020 and 2019, respectively.

Incentive Bonus, Option and Restricted Stock Plan— The Incentive Bonus, Option and Restricted Stock Plan (the “Incentive Plan”), is a non-qualified plan that includes the following components: an Annual Bonus and a Long-Term Incentive, which included a Total Shareholder Return Plan, a Stock Option component, and a Restricted Stock component for certain key officers of the Company. The components allow for payments of cash, a mixture of cash and stock, granting of stock options, or granting of restricted stock, depending upon the component of the Incentive Plan in which the award is earned, through the attainment of certain performance goals for a time-based vesting requirements. Performance goals or service vesting requirements are established by Wesbanco’s Compensation Committee. On April 20, 2017, Wesbanco registered an additional 1,000,000 shares of Wesbanco common stock for issuance under the Incentive Plan. Wesbanco had 35,711 and 408,466 shares registered on Form S-8 remaining for future issuance under equity compensation plans at December 31, 2020 and 2019, respectively. As of December 31, 2020, all restricted shares available for issuance have been exhausted.

Annual Bonus

Compensation expense for key officers for the Annual Bonus was $1.7 million, $2.1 million and $2.0 million for 2020, 2019, and 2018, respectively.

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Stock Options

On May 26, 2020, Wesbanco granted 142,600 stock options to selected participants, including certain named executive officers at an exercise price of $21.55 per share. The options granted in 2020 are service-based and vest in two equal installments on December 31, 2020 and December 31, 2021, and expire seven years from the date of grant.

Compensation expense for the stock option component of the Incentive Plan was $0.6 million, $0.9 million and $0.6 million for 2020, 2019 and 2018, respectively. At December 31, 2020, the total unrecognized compensation expense related to non-vested stock option grants totaled $0.2 million with an expense recognition period of one year remaining. The maximum term of options granted under Wesbanco’s stock option plan is ten years from the original grant date; however, options granted in 2020 had a term of seven years.

The total intrinsic value of options exercised was $45 thousand and $132 thousand for the years ended December 31, 2020 and 2019, respectively. The cash received and related tax benefit realized from stock options exercised was $153 thousand and $11 thousand in 2020 and was $157 thousand and $30 thousand in 2019. Shares issued in connection with options exercised are issued from treasury shares acquired under Wesbanco’s share repurchase plans or from issuance of authorized but unissued shares, subject to prior SEC registration.

The fair value of stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that might otherwise have a significant effect on the value of stock options granted that are not considered by the model.

The following table sets forth the significant assumptions used in calculating the fair value of the grants:

	For the Years Ended December 31,
	2020			2019			2018
Weighted-average life	5.7 years			5.6 years			5.2 years
Risk-free interest rate		0.41	%		2.18	%		2.95	%
Dividend yield		5.94	%		2.80	%		2.54	%
Volatility factor		28.38	%		21.97	%		21.27	%
Fair value of the grants	$	2.54		$	6.36		$	8.54

The weighted-average life assumption is an estimate of the length of time that an employee might hold an option before option exercise, option expiration or employment termination. The weighted-average life assumption was developed using historical experience. Wesbanco used a weighted historical volatility of its common stock price over the weighted average life prior to each issuance as the volatility factor assumption, adjusted for abnormal volatility during certain periods, and current and future dividend payment expectations for the dividend assumption.

The following table shows the activity for the Stock Option component of the Incentive Plan:

	For the Year Ended December 31, 2020
	Number of Options			Weighted Average Exercise Price Per Share
Outstanding at beginning of the year		733,440		$	33.06
Granted during the year		142,600			21.55
Exercised during the year		(61,623	)		15.93
Forfeited or expired during the year		(39,668	)		22.03
Outstanding at end of the year		774,749		$	32.87
Exercisable at year end		703,636		$	34.01

The aggregate intrinsic value of the outstanding shares and the shares exercisable at year-end was $2.2 million and $1.6 million, respectively.

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The following table shows the average remaining life of the stock options at December 31, 2020:

Year Issued	Exercisable at Year End		Exercise Price Range Per Share		Options Outstanding		Weighted Average Exercise Price		Weighted Avg. Remaining Contractual Life in Years
2011		393	$	9.97		393	$	9.97		0.07
2012		5,490	10.20 to 13.96			5,490	$	12.89		1.55
2013		18,745		15.35		18,745	$	15.35		2.16
2014		53,925	21.37 to 28.79			53,925	$	25.77		1.51
2015		72,522	18.33 to 31.58			72,522	$	27.19		2.43
2016		84,988	22.63 to 32.37			84,988	$	29.62		3.18
2017		104,475		38.88		104,475	$	38.88		3.35
2018		166,486	36.97 to 45.65			166,486	$	43.31		5.20
2019		125,500		38.93		125,500	$	38.93		5.37
2020		71,112		21.55		142,225	$	21.55		6.40
Total		703,636	$ 9.97 to $45.65			774,749	$	32.87		4.36

Restricted Stock

During 2020, Wesbanco granted 176,924 shares of service-based restricted stock to certain officers and directors, which cliff vest 36 months from the date of grant. The weighted average fair value of the restricted stock granted was $21.58 per share. The restricted stock grant provides the recipient with voting rights from the date of issuance. Dividends paid on these restricted shares during the restriction period are converted into additional shares of restricted stock on the date the cash dividend would have otherwise been paid, but do not vest until the related grant of the restricted shares complete their vesting. The Compensation Committee has discretion to elect to pay such dividends in cash to participants. Voting rights accrue from date of issuance of these shares.

Wesbanco also granted 30,298 shares of performance-based restricted stock to select officers. These shares have a three-year performance period, beginning January 1, 2021, based on Wesbanco’s return on average assets and return on average tangible common equity measured for each year, compared to a national peer group of financial institutions with total assets between approximately $10.8 billion and $37.7 billion. Earned performance-based restricted shares are subject to additional service-based vesting with 50% vesting on May 27, 2024 after the completion of the three-year performance period and the final 50% vesting on May 27, 2025. For the 2017 performance-based restricted stock, the second year reporting period of 2019 achieved 85% of the performance goal. The Compensation Committee approved the goal achievement in 2020, thus Wesbanco issued 2,550 shares to the select officers, but these shares will not vest until May 16, 2021 and May 16, 2022. For the 2018 performance based restricted stock, the first year reporting period of 2019 achieved 85% of the performance goal. The Compensation Committee approved the goal achievement in 2020, thus Wesbanco issued 2,289 shares to the select officers, but these shares will not vest until May 16, 2022 and May 16, 2023.

Dividends accrue on the restricted shares once the performance objective is achieved and then are converted into additional shares of restricted stock on the date the cash dividend would have otherwise been paid, but do not vest until the related grant of the restricted shares complete their vesting. The Compensation Committee has discretion to elect to pay such dividends in cash to participants. Voting rights accrue upon achievement of the performance objective.

Compensation expense relating to all restricted stock was $4.6 million, $4.2 million and $3.0 million in 2020, 2019 and 2018, respectively. At December 31, 2020, the total unrecognized compensation expense related to non-vested restricted stock grants totaled $7.0 million with a weighted average expense recognition period of 1.5 years remaining.

The following table shows the activity for the Restricted Stock component of the Incentive Plan:

For the Year Ended December 31, 2020	Restricted Stock			Weighted Average Grant Date Fair Value Per Share
Non-vested at January 1, 2020		352,250		$	40.75
Granted during the year		207,222			21.58
Vested during the year		(89,954	)		36.34
Forfeited or expired during the year		(6,328	)		24.29
Dividend reinvestment		16,854			23.18
Non-vested at end of the year		480,044		$	32.90

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Total Shareholder Return Plan

On November 18, 2015, Wesbanco’s Compensation Committee adopted Administrative Rules for a Total Shareholder Return Plan (“TSRP”). The TSRP measures the TSR on Wesbanco common stock over a three-year measurement period relative to the return of an established peer group of publicly traded companies over the same performance period. The award is determined at the end of the three-year period if the TSR of Wesbanco common stock is equal to or greater than the 50th percentile of the TSR of the peer group. The number of shares to be earned by the participant shall be 200% of the grant-date award if the TSR of Wesbanco common stock is equal to or greater than the 75th percentile of the TSR of the peer group. Upon achieving the market-based metric, shares determined to be earned by the participant become service-based and vest in three equal annual installments. Voting rights accrue at such time as well. Wesbanco granted 12,000 TSRP shares in 2020 for the performance period beginning January 1, 2020 and ending December 31, 2022 to certain executive officers. The fair value of the market-based awards is based on a Monte-Carlo Simulation valuation of our common stock and our peers’ common stock as of the grant date.

Based on the calculation of shareholder return over the measurement period beginning January 1, 2018 and ending December 31, 2020, Wesbanco stock performance did not equal or exceed the 50th percentile when compared to peer calculations of shareholder return. Therefore, none of the 12,000 shares granted in 2018 will vest.

Compensation expense relating to the TSR plans was $0.4 million, $0.4 million, and $0.5 million in 2020, 2019 and 2018, respectively. The grant date fair value of the 2020 TSR award was $24.46 per share. At December 31, 2020, the total unrecognized compensation expense related to non-vested TSR awards totaled $0.4 million with a weighted average expense recognition period of 2.4 years remaining.

NOTE 14. REVENUE RECOGNITION

Interest income, net securities gains (losses) and bank-owned life insurance are not in scope of ASC 606, Revenue from Contracts with Customers. For the revenue streams in scope of ASC 606 - trust fees, service charges on deposits, net securities brokerage revenue, debit card sponsorship income, payment processing fees, electronic banking fees, mortgage banking income and net gain or loss on sale of other real estate owned – there are no significant judgements related to the amount and timing of revenue recognition.

Trust fees: Fees are earned over a period of time between monthly and annually, per the related fee schedule. The fees are earned ratably over the period for investment, safekeeping and other services performed by Wesbanco. The fees are accrued when earned based on the daily asset value on the last day of the quarter.  In most cases, the fees are directly debited from the customer account.  WesMark fees consist of investment advisory fees and shareholder service fees and are paid to Wesbanco by the WesMark mutual funds on a monthly basis for Wesbanco’s involvement with the management of the funds.

Service charges on deposits: There are monthly service charges for both commercial and personal banking customers, which are earned over the month per the related fee schedule based on the customers’ deposits. There are also transaction-based fees, which are earned based on specific transactions or customer activity within the customers’ deposit accounts. These are earned at the time the transaction or customer activity occurs. The fees are debited from the customer account.

Net securities brokerage revenue: Commission income is earned based on customer transactions and management of investments. The commission income from customers’ transactions is recognized when the transaction is complete and approved.  Annuity commissions are earned based upon the carrier’s commission rate for the annuity product chosen by the investing customer.   The commission income from the management of investments over time is earned continuously over a quarterly period.

Debit card sponsorship income:  Debit card sponsorship income is earned from Wesbanco’s sponsorship of its customers, which include independent service organizations, processors and other banks into different debit networks.  For providing this service, the customers pay the bank a per transaction fee for each transaction processed through the network.  In some cases, customers are also charged annual sponsorship fees and non-compliance fees as applicable.  The fees are earned at the time the transaction or customer activity occurs.  The fees are either directly debited from the customers' deposit accounts or are billed to the customer.

Payment processing fees: Payment processing fees are earned from the bill payment and electronic funds transfer (“EFT”) services provided under the name FirstNet. The fees are derived from both the individual consumer banking transactions and from businesses or service providers through monthly billing for total transactions occurring.  These fees are earned at the time the transaction or customer activity occurs.  The fees are debited from the customers’ deposit accounts or charged directly to the business or service provider.

Electronic banking fees: Interchange and ATM fees are earned based on customer and ATM transactions. Revenue is recognized when the transaction is settled.

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Mortgage banking income: Income is earned when Wesbanco-originated loans are sold to an investor on the secondary market. The investor bids on the loans. If the price is accepted, Wesbanco delivers the loan documents to the investor. Once received and approved by the investor, revenue is recognized and the loans are derecognized from the Consolidated Balance Sheet. Prior to the loans being sold, they are classified as loans held for sale. Additionally, the changes in the fair value of the loans held for sale, loan commitments and related derivatives are included in mortgage banking income and are slightly offset by any deferred direct origination costs, such as mortgage loan officer commissions.

Net gain or loss on sale of other real estate owned: Net gain or loss is recorded when other real estate is sold to a third party and the Bank collects substantially all of the consideration to which Wesbanco is entitled in exchange for the transfer of the property.

The following table summarizes the point of revenue recognition and the income recognized for each of the revenue streams:

		For the Years Ended December 31,
(in thousands)	Point of Revenue Recognition	2020		2019		2018
Revenue Streams
Trust fees
Trust account fees	Over time	$	17,753	$	18,059	$	15,833
WesMark fees	Over time		8,582		8,520		8,790
Total trust fees			26,335		26,579		24,623
Service charges on deposits
Commercial banking fees	Over time		2,337		2,033		1,733
Personal service charges	At a point in time and over time		19,606		24,941		21,937
Total service charges on deposits			21,943		26,974		23,670
Net securities brokerage revenue
Annuity commissions	At a point in time		3,906		4,829		5,178
Equity and debt security trades	At a point in time		349		434		429
Managed money	Over time		952		738		647
Trail commissions	Over time		982		989		932
Total net securities brokerage revenue			6,189		6,990		7,186
Debit card sponsorship income (1)	At a point in time and over time		2,792		328		-
Payment processing fees (1)	At a point in time and over time		3,010		3,002		1,028
Electronic banking fees	At a point in time		17,524		22,634		23,300
Mortgage banking income	At a point in time		22,736		8,219		5,840
Net gain on other real estate owned and other assets	At a point in time		103		732		524

(1) Debit card sponsorship income and payment processing fees are included in other non-interest income.

NOTE 15. OTHER OPERATING EXPENSES

Other operating expenses consist of miscellaneous taxes, consulting fees, ATM expenses, postage, supplies, legal fees, communications, other real estate owned and foreclosure expenses, and other expenses. Other operating expenses are presented below:

	For the Years Ended December 31,
(in thousands)	2020			2019		2018
Franchise and other miscellaneous taxes	$	14,112		$	12,813	$	9,847
Consulting, regulatory and advisory fees		11,717			8,993		6,976
ATM and electronic banking interchange expenses		8,365			6,931		5,718
Postage and courier expenses		5,028			5,334		4,143
Supplies		4,561			4,499		3,180
Legal fees		3,307			3,054		2,778
Communications		4,292			3,720		2,569
Other real estate owned and foreclosure expenses		(108	)		397		831
Other		19,474			16,915		14,679
Total other operating expenses	$	70,748		$	62,656	$	50,721

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NOTE 16. INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.  The Act provided for the opportunity to carryback certain federal net operating losses up to five years.  Wesbanco’s net operating losses had previously been recorded at the current statutory rate of 21%.  As a result of the CARES Act, Wesbanco recorded an income tax benefit of $0.2 million in recognition of the rate differential between the current statutory rate and the rate in effect for which year the net operating loss will be carried back.  

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

	For the Years Ended December 31,
	2020			2019			2018
Federal statutory tax rate		21.0	%		21.0	%		21.0	%
Net tax-exempt interest income on securities and loans of state and    political subdivisions		(4.2	%)		(3.3	%)		(3.2	%)
State income taxes, net of federal tax effect		1.9	%		1.7	%		1.7	%
Bank-owned life insurance		(1.1	%)		(0.6	%)		(0.8	%)
General business credits		(3.7	%)		(2.2	%)		(1.6	%)
All other—net		2.0	%		1.2	%		0.9	%
Effective tax rate		15.9	%		17.8	%		18.0	%

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

	For the Years Ended December 31,
(in thousands)	2020			2019		2018
Current:
Federal	$	27,924		$	22,540	$	20,707
State		5,629			3,977		3,542
Deferred:
Federal		(8,418	)		7,736		6,864
State		(2,100	)		88		299
Total	$	23,035		$	34,341	$	31,412

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

(in thousands)	2020		2019		2018
Securities and defined benefit pension plan unrecognized items	$	9,730	$	11,570	$	(1,250	)

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Deferred tax assets and liabilities consist of the following:

	December 31,
(in thousands)	2020			2019			2018
Deferred tax assets:
Allowance for loan losses	$	44,859		$	12,788		$	11,207
Compensation and benefits		6,894			7,144			5,851
Security gains		2,113			3,031			3,707
Non-accrual interest income		1,135			1,297			1,388
Tax credit carryforwards		—			149			—
Net operating loss carryforwards		5,472			6,923			4,854
Fair value adjustments on securities available-for-sale		—			—			6,345
Lease accrual		13,530			13,787			—
Other		5,441			2,314			2,125
Gross deferred tax assets		79,444			47,433			35,477
Deferred tax liabilities:
Depreciation and amortization		(3,414	)		(4,014	)		(1,020	)
Accretion on securities		(274	)		(339	)		(461	)
Deferred fees and costs		(3,018	)		(2,388	)		(1,641	)
Purchase accounting adjustments		(8,669	)		(2,787	)		(1,003	)
Fair value adjustments on securities available-for-sale		(14,865	)		(5,749	)		—
Partnership adjustments		(555	)		(521	)		(680	)
Lease - right of use assets		(12,438	)		(13,064	)		—
Other		(168	)		(40	)		(367	)
Gross deferred tax liabilities		(43,401	)		(28,902	)		(5,172	)
Net deferred tax assets	$	36,043		$	18,531		$	30,305

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 YCB in 2016 and OLBK in 2019, Wesbanco has federal net operating loss (“NOL”) carryforwards of $25.7 million, which expire beginning in 2033 and 2036; respectively. Wesbanco has Maryland NOL carryforwards of $18.0 million, which begin expiring in 2035.  The use of the federal NOL and other carryforwards are limited by Internal Revenue Code Section 382, but they are 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, 2020 and 2019 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 $10.8 million for both 2020 and 2019. 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 $1.0 million, $1.0 million and $(0.2) million for the years ended December 31, 2020, 2019 and 2018, respectively.

Wesbanco had $0.3 million and $0.4 million of unrecognized tax benefits and interest as of December 31, 2020 and 2019, respectively. As of December 31, 2020, $0.3 million of these tax benefits would affect the effective tax rate if recognized. At December 31, 2020 and December 31, 2019, 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 2017.

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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)	2020			2019			2018
Balance at beginning of year	$	434		$	465		$	467
Additions based on tax positions related to the current year		—			58			68
Reductions for tax positions of prior years		—			—			—
Reductions due to the statute of limitations		(110	)		(89	)		(70	)
Settlements		—			—			—
Balance at end of year	$	324		$	434		$	465

NOTE 17. FAIR VALUE MEASUREMENT

Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.

Fair value is determined at one point in time and is not representative of future value.  These amounts do not reflect the total value of a going concern organization. Management does not have the intention to dispose of a significant portion of its assets and liabilities, and therefore the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.

The following is a discussion of assets and liabilities measured at fair value on a recurring basis and valuation techniques applied:

Investment securities:  The fair value of investment securities which are measured on a recurring basis are determined primarily by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other similar securities. These securities are classified within level 1 or 2 in the fair value hierarchy.  Positions that are not traded in active markets for which valuations are generated using assumptions not observable in the market or management’s best estimate are classified within level 3 of the fair value hierarchy.  This includes certain specific municipal debt issues for which the credit quality and discount rate must be estimated.  

Loans held for sale:  Loans held for sale are carried, in aggregate, at fair value as Wesbanco previously elected the fair value option.  The use of a valuation model using quoted prices of similar instruments are significant observable inputs in arriving at the fair value and therefore loans held for sale are classified within level 2 of the fair value hierarchy.

Derivatives:  Wesbanco enters into interest rate swap agreements with qualifying commercial customers to meet their financing, interest rate and other risk management needs.  These agreements provide the customer the ability to convert from variable to fixed interest rates.  The credit risk associated with derivatives executed with customers is essentially the same as that involved in extending loans and is subject to normal credit policies and monitoring.  Those interest rate swaps are economically hedged by offsetting interest rate swaps that Wesbanco executes with derivative counterparties in order to offset its exposure on the fixed components of the customer interest rate swap agreements.  The interest rate swap agreement with the loan customer and with the counterparty is reported at fair value in other assets and other liabilities on the consolidated balance sheet with any resulting gain or loss recorded in current period earnings as other income and other expense.

Wesbanco enters into forward TBA contracts to manage the interest rate risk between the loan commitments to the customer and the closing of the loan for loans that will be sold on a mandatory basis to secondary market investors.  The forward TBA contract is reported at fair value in other assets and other liabilities on the consolidated balance sheet with any resulting gain or loss recorded in current period’s earnings as mortgage banking income.

Wesbanco determines the fair value for derivatives using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities.  Wesbanco incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. 

We may be required from time to time to measure certain assets and liabilities at fair value on a nonrecurring basis in accordance with GAAP.  These adjustments to fair value usually result from the application of lower of cost or market accounting or write-downs of individual assets and liabilities.

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Individually-evaluated nonperforming loans: Individually-evaluated non-performing loans are carried at the amortized cost basis less the specific allowance calculated with the CECL. Since these loans are nonperforming, cash flows could not be estimated and thus are calculated using a cost basis approach or collateral value approach.

Other real estate owned and repossessed assets:  Other real estate owned and repossessed assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs.  The use of independent appraisals and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral, and therefore other real estate owned and repossessed assets are classified within level 3 of the fair value hierarchy.

The fair value amounts presented in the table below are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position. The following tables set forth Wesbanco’s financial assets and liabilities that were accounted for at fair value on a recurring and nonrecurring basis by level within the fair value hierarchy as of December 31, 2020 and December 31, 2019:

			December 31, 2020
			Fair Value Measurements Using:
(in thousands)	December 31, 2020		Quoted Prices in Active Markets for Identical Assets (level 1)		Significant Other Observable Inputs (level 2)		Significant Unobservable Inputs (level 3)
Recurring fair value measurements
Equity securities	$	13,047	$	13,047	$	—	$	—
Available-for-sale debt securities:
U.S. Treasury		39,982		—		39,982		—
U.S. Government sponsored entities and agencies		211,682		—		211,682		—
Residential mortgage-backed securities and collateralized    mortgage obligations of government sponsored    entities and agencies		1,264,737		—		1,264,737		—
Commercial mortgage-backed securities and collateralized    mortgage obligations of government sponsored entities    and agencies		320,098		—		320,098		—
Obligations of state and political subdivisions		115,762		—		114,227		1,535
Corporate debt securities		25,875		—		25,875		—
Total available-for-sale debt securities	$	1,978,136	$	—	$	1,976,601	$	1,535
Loans held for sale		168,378		—		168,378		—
Other assets—interest rate derivatives agreements		46,418		—		46,418		—
Total assets recurring fair value measurements	$	2,205,979	$	13,047	$	2,191,397	$	1,535
Other liabilities—interest rate derivatives agreements		49,917		—		49,917		—
Total liabilities recurring fair value measurements	$	49,917	$	—	$	49,917	$	—
Nonrecurring fair value measurements
Individually-evaluated nonperforming loans	$	1,958	$	—	$	—	$	1,958
Other real estate owned and repossessed assets		549		—		—		549
Total nonrecurring fair value measurements	$	2,507	$	—	$	—	$	2,507

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	December 31, 2019
	Fair Value Measurements Using:
(in thousands)	December 31, 2019		Quoted Prices in Active Markets for Identical Assets (level 1)		Significant Other Observable Inputs (level 2)		Significant Unobservable Inputs (level 3)
Recurring fair value measurements
Equity securities	$	12,343	$	12,343	$	—	$	—
Available-for-sale debt securities:
U.S. Treasury		32,836		—		32,836		—
U.S. Government sponsored entities and agencies		159,628		—		159,628		—
Residential mortgage-backed securities and collateralized    mortgage obligations of government sponsored    entities and agencies		1,815,987		—		1,815,987		—
Commercial mortgage-backed securities and collateralized    mortgage obligations of government sponsored entities    and agencies		190,409		—		190,409		—
Obligations of state and political subdivisions		145,609		—		144,004		1,605
Corporate debt securities		49,089		—		49,089		—
Total available-for-sale debt securities	$	2,393,558	$	—	$	2,391,953	$	1,605
Loans held for sale		43,013		—		43,013		—
Other assets—interest rate derivatives agreements		14,585		—		14,585		—
Total assets recurring fair value measurements	$	2,463,499	$	12,343	$	2,449,551	$	1,605
Other liabilities—interest rate derivatives agreements		16,117		—		16,117		—
Total liabilities recurring fair value measurements	$	16,117	$	—	$	16,117	$	—
Nonrecurring fair value measurements
Impaired loans	$	2,362	$	—	$	—	$	2,362
Other real estate owned and repossessed assets		4,178		—		—		4,178
Total nonrecurring fair value measurements	$	6,540	$	—	$	—	$	6,540

Wesbanco’s policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer. There were no significant transfers between levels 1, 2, or 3 for the years ended December 31, 2020 and 2019.

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Wesbanco has utilized level 3 inputs to determine fair value:

	Quantitative Information about Level 3 Fair Value Measurements
(in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range / Weighted Average
December 31, 2020:
Individually-evaluated nonperforming loans	$	1,958	Appraisal of collateral (1)	Appraisal adjustments (2)	(30.0%)/(30.0%)
				Liquidation expenses (2)	(5.6%)/(5.6%)
Other real estate owned and    repossessed assets		549	Appraisal of collateral (1)(3)
December 31, 2019:
Impaired loans	$	2,362	Appraisal of collateral (1)	Appraisal adjustments (2)	(29.8%)/(29.8%)
				Liquidation expenses (2)	(5.3%)/(5.3%)
Other real estate owned and    repossessed assets		4,178	Appraisal of collateral (1)(3)

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs, which are not identifiable.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of appraisal adjustments and liquidation expenses are presented as a percent of the appraisal.

(3) Includes estimated liquidation expenses and numerous dissimilar qualitative adjustments by management which are not identifiable.

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The estimated fair values of Wesbanco’s financial instruments are summarized below:

					Fair Value Measurements at December 31, 2020
(in thousands)	Carrying Amount		Fair Value Estimate		Quoted Prices in Active Markets for Identical Assets (level 1)		Significant Other Observable Inputs (level 2)		Significant Unobservable Inputs (level 3)
Financial Assets
Cash and due from banks	$	905,447	$	905,447	$	905,447	$	—	$	—
Equity securities		13,047		13,047		13,047		—		—
Available-for-sale debt securities		1,978,136		1,978,136		—		1,976,601		1,535
Held-to-maturity debt securities		730,886		768,183		—		767,720		463
Net loans		10,603,406		10,802,883		—		—		10,802,883
Loans held for sale		168,378		168,378		—		168,378		—
Other assets—interest rate derivatives		46,418		46,418		—		46,418		—
Accrued interest receivable		66,790		66,790		66,790		—		—
Financial Liabilities
Deposits		12,429,373		12,439,981		10,810,863		1,629,118		—
Federal Home Loan Bank borrowings		549,003		555,375		—		555,375		—
Other borrowings		241,950		235,796		235,796		—		—
Subordinated debt and junior subordinated debt		192,291		174,452		—		105,768		68,684
Other liabilities—interest rate derivatives		49,917		49,917		—		49,917		—
Accrued interest payable		4,314		4,314		4,314		—		—

					Fair Value Measurements at December 31, 2019
(in thousands)	Carrying Amount		Fair Value Estimate		Quoted Prices in Active Markets for Identical Assets (level 1)		Significant Other Observable Inputs (level 2)		Significant Unobservable Inputs (level 3)
Financial Assets
Cash and due from banks	$	234,796	$	234,796	$	234,796	$	—	$	—
Equity securities		12,343		12,343		12,343		—		—
Available-for-sale debt securities		2,393,558		2,393,558		—		2,391,953		1,605
Held-to-maturity debt securities		851,753		874,523		—		873,995		528
Net loans		10,215,556		10,297,989		—		—		10,297,989
Loans held for sale		43,013		43,013		—		43,013		—
Other assets—interest rate derivatives		14,585		14,585		—		14,585		—
Accrued interest receivable		43,648		43,648		43,648		—		—
Financial Liabilities
Deposits		11,004,006		10,989,818		8,948,086		2,041,732		—
Federal Home Loan Bank borrowings		1,415,615		1,420,302		—		1,420,302		—
Other borrowings		282,362		282,691		279,345		3,346		—
Subordinated debt and junior subordinated debt		199,869		188,349		—		122,934		65,415
Other liabilities—interest rate derivatives		16,117		16,117		—		16,117		—
Accrued interest payable		8,077		8,077		8,077		—		—

The following methods and assumptions were used to measure the fair value of financial instruments recorded at cost on Wesbanco’s consolidated balance sheets:

Cash and due from banks:  The carrying amount for cash and due from banks is a reasonable estimate of fair value.

Held-to-maturity debt securities:  Fair values for debt securities held-to-maturity are determined in the same manner as investment securities, which are described above.

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Net loans:  Fair values for loans are estimated using a discounted cash flow methodology.  The discount rates take into account interest rates currently being offered to customers for loans with similar terms, the credit risk associated with the loan and other market factors, including liquidity.  Wesbanco believes the discount rates are consistent with transactions occurring in the marketplace for both performing and distressed loan types. The carrying value is net of the allowance for loan losses and other associated premiums and discounts.  Due to the significant judgment involved in evaluating credit quality, loans are classified within level 3 of the fair value hierarchy.

Accrued interest receivable:  The carrying amount of accrued interest receivable approximates its fair value.

Deposits:  The carrying amount is considered a reasonable estimate of fair value for demand, savings and other variable rate deposit accounts. The fair value of fixed maturity certificates of deposit is estimated by a discounted cash flow method using rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank borrowings:  The fair value of FHLB borrowings is based on rates currently available to Wesbanco for borrowings with similar terms and remaining maturities.

Other borrowings:  The carrying amount of federal funds purchased and overnight sweep accounts generally approximate fair value.  Other repurchase agreements are based on quoted market prices if available.  If market prices are not available, for certain fixed and adjustable rate repurchase agreements, then quoted market prices of similar instruments are used.

Subordinated debt and junior subordinated debt:  The fair value of subordinated debt is estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements. Due to the pooled nature of junior subordinated debt owed to unconsolidated subsidiary trusts, which are not actively traded, estimated fair value is based on recent similar transactions of single-issuer trust preferred securities.

Accrued interest payable:  The carrying amount of accrued interest payable approximates its fair value.

Off-balance sheet financial instruments:  Off-balance sheet financial instruments consist of commitments to extend credit, including letters of credit. Fair values for commitments to extend credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit standing of the counterparties. The estimated fair value of the commitments to extend credit and letters of credit are insignificant and therefore are not presented in the above tables.

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NOTE 18. COMPREHENSIVE INCOME/(LOSS)

The activity in accumulated other comprehensive income for the years ended December 31, 2020, 2019 and 2018 is as follows:

	Accumulated Other Comprehensive Income/(Loss) (1)
(in thousands)	Defined Benefit Plans			Unrealized Gains (Losses) on Debt Securities Available-for- Sale			Unrealized Gains on Debt Securities Transferred from Available-for- Sale to Held-to- Maturity			Total
Balance at December 31, 2019	$	(17,468	)	$	18,644		$	25		$	1,201
Other comprehensive income/(loss) before    reclassifications		(320	)		30,153			—			29,833
Amounts reclassified from accumulated other    comprehensive income/(loss)		2,286			(1,936	)		(25	)		325
Period change		1,966			28,217			(25	)		30,158
Balance at December 31, 2020	$	(15,502	)	$	46,861		$	—		$	31,359
Balance at December 31, 2018	$	(16,542	)	$	(21,522	)	$	193		$	(37,871	)
Other comprehensive income/(loss) before    reclassifications		(3,239	)		40,341			—			37,102
Amounts reclassified from accumulated other    comprehensive income/(loss)		2,313			(175	)		(168	)		1,970
Period change		(926	)		40,166			(168	)		39,072
Balance at December 31, 2019	$	(17,468	)	$	18,644		$	25		$	1,201
Balance at December 31, 2017	$	(18,626	)	$	(13,250	)	$	381		$	(31,495	)
Other comprehensive income/(loss) before    reclassifications		(4,277	)		(7,220	)		—			(11,497	)
Acquired FFKT post-retirement medical benefit plan		4,235			—			—			4,235
Amounts reclassified from accumulated other    comprehensive income/(loss)		2,126			11			(188	)		1,949
Period change		2,084			(7,209	)		(188	)		(5,313	)
Adoption of ASU 2016-01 (2)		—			(1,063	)		—			(1,063	)
Balance at December 31, 2018	$	(16,542	)	$	(21,522	)	$	193		$	(37,871	)

(1) All amounts are net of tax. Related income tax expense or benefit is calculated using a combined Federal and State income tax rate approximating 23% in all periods presented.

(2) See Note 4, “Securities”, for additional information about Wesbanco’s adoption of ASU 2016-01.

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Details about Accumulated Other Comprehensive Income/(Loss) Components	Amounts Reclassified from Accumulated Other Comprehensive Income/ (Loss) For the Years Ended December 31,									Affected Line Item in the Statement of Net Income
(in thousands)	2020			2019			2018
Securities available-for-sale (1):
Net securities (gains) losses reclassified into    earnings	$	(2,540	)	$	(227	)	$	15		Net securities gains (Non-interest income)
Related income tax expense (benefit)		604			52			(4	)	Provision for income taxes
Net effect on accumulated other comprehensive    income/(loss) for the period		(1,936	)		(175	)		11
Securities held-to-maturity (1):
Amortization of unrealized gain transferred    from available-for-sale		(32	)		(222	)		(244	)	Interest and dividends on securities (Interest and    dividend income)
Related income tax expense		7			54			56		Provision for income taxes
Net effect on accumulated other comprehensive    income/(loss) for the period		(25	)		(168	)		(188	)
Defined benefit plans (2):
Amortization of net loss and prior service    costs		3,000			3,042			2,948		Employee benefits (Non-interest expense)
Related income tax benefit		(714	)		(729	)		(822	)	Provision for income taxes
Net effect on accumulated other comprehensive    income/(loss) for the period		2,286			2,313			2,126
Total reclassifications for the period	$	325		$	1,970		$	1,949

(1) For additional detail related to unrealized gains on securities and related amounts reclassified from accumulated other comprehensive income see Note 4, “Securities.”

(2) Included in the computation of net periodic pension cost. See Note 13, “Employee Benefit Plans” for additional detail.

NOTE 19. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments— In the normal course of business, Wesbanco offers off-balance sheet credit arrangements to enable its customers to meet their financing objectives. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. Wesbanco’s exposure to credit losses in the event of non-performance by the other parties to the financial instruments for commitments to extend credit and standby letters of credit is limited to the contractual amount of those instruments. Wesbanco uses the same credit policies in making commitments and conditional obligations as for all other lending. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The allowance for credit losses associated with commitments was $9.5 million and $0.9 million as of December 31, 2020 and 2019, respectively, and is included in other liabilities on the Consolidated Balance Sheets.

Letters of credit are conditional commitments issued by banks to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including normal business activities, bond financing and similar transactions. Letters of credit are considered guarantees. The liability associated with letters of credit was $0.2 million as of both December 31, 2020 and 2019.

Contingent obligations to purchase loans funded by other entities include affordable housing plan guarantees, credit card guarantees, loans sold with recourse as well as obligations to the FHLB. Affordable housing plan guarantees are performance guarantees for various building project loans. The guarantee amortizes as the loan balances decrease. Credit card guarantees are credit card balances not owned by Wesbanco, whereby the Bank guarantees the performance of the cardholder.

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The following table presents total commitments to extend credit, guarantees and various letters of credit outstanding:

	December 31,
(in thousands)	2020		2019
Lines of credit	$	2,510,011	$	2,469,676
Loans approved but not closed		381,180		504,623
Overdraft limits		154,322		149,519
Letters of credit		53,788		57,205
Contingent obligations and other guarantees		126,984		81,551

Contingent Liabilities— Wesbanco is a party to various legal and administrative proceedings and claims. While any litigation contains an element of uncertainty, management does not believe that a material loss related to such proceedings or claims pending or known to be threatened is reasonably possible.

NOTE 20. WESBANCO BANK COMMUNITY DEVELOPMENT CORPORATION

Wesbanco Bank Community Development Corporation (“WBCDC”), a consolidated subsidiary of Wesbanco Bank, is a Certified Development Entity (“CDE”) with $125.0 million of New Markets Tax Credits (“NMTC”) of which $100.0 million had been invested in WBCDC at December 31, 2020. The remaining $25.0 million of NMTC, which had not been invested as of December 31, 2020 was awarded  to WBCDC in 2019. The NMTC program is administered by the Community Development Financial Institutions Fund of the U.S. Treasury and is aimed at stimulating economic and community development and job creation in low-income communities. The program provides federal tax credits to investors who make qualified equity investments (“QEIs”) in a CDE. The CDE is required to invest the proceeds of each QEI in low-income communities, which are generally defined as those census tracts with poverty rates greater than 20% and/or median family incomes that are less than or equal to 80% of the area median family income.

The credit provided to the investor totals 39% of each QEI in a CDE and is claimed over a seven-year credit allowance period. In each of the first three years, the investor receives a credit equal to 5% of the total amount the investor paid to the CDE for each QEI. For each of the remaining four years, the investor receives a credit equal to 6% of the total amount the investor paid to the CDE for each QEI. As of December 31, 2020, Wesbanco has received $26.7 million in tax credits over the seven-year credit allowance periods for its $100.0 million NMTC authority invested in WBCDC. Wesbanco is eligible to receive an additional $12.3 million in tax credits with respect to aggregate QEI amounts invested with a remaining seven-year credit allowance period. In addition, Wesbanco will be eligible to receive $9.8 million in tax credits over a seven-year credit allowance period for the $25.0  million NMTC authority awarded in 2019 that has yet to be invested.

Wesbanco Bank recognized $2.0 million, $1.6 million and $0.7 million in NMTC in its income tax provision for the years ended December 31, 2020, 2019 and 2018, respectively. These tax credits are subject to certain general business tax credit limitations and are therefore limited in deductibility on Wesbanco’s federal income tax return. As of December 31, 2020, no prior NMTC has been carried forward to future tax years.

The NMTC claimed by Wesbanco Bank with respect to each QEI remain subject to recapture over each QEI’s credit allowance period upon the occurrence of any of the following:

• if less than substantially all (generally defined as 85%) of the QEI proceeds are not used by WBCDC to make qualified low income community investments;

• WBCDC ceases to be a CDE; or

• WBCDC redeems its QEI investment prior to the end of the current credit allowance periods.

At December 31, 2020, 2019 and 2018, none of the above recapture events had occurred, nor in the opinion of management are such events anticipated to occur in the foreseeable future. Approximately half of the tax credits are no longer subject to recapture.

133

The following condensed financial statements summarize the financial position of WBCDC as of December 31, 2020, and the results of its operations and cash flows for the year ended December 31, 2020:

BALANCE SHEET

(in thousands)	December 31, 2020
Assets
Cash and due from banks	$	65,282
Loans, net of allowance for loan losses of $1.0 million		46,951
Investments		1,634
Other assets		794
Total Assets	$	114,661
Liabilities	$	246
Shareholder Equity		114,415
Total Liabilities and Shareholder Equity	$	114,661

STATEMENT OF INCOME

(in thousands)	For the Year Ended December 31, 2020
Interest income
Loans	$	1,378
Other		26
Total interest income		1,404
Provision for loan losses		714
Net interest income after provision for loan losses		690
Loss on investments		(58	)
Non-interest expense		603
Income before provision for income taxes		29
Provision for income taxes		9
Net income	$	20

STATEMENT OF CASH FLOWS

(in thousands)	For the Year Ended December 31, 2020
Operating Activities
Net income	$	20
Provision for loan losses		714
Loss on investments		58
Net change in other assets		(767	)
Net change in other liabilities		(73	)
Net cash used in operating activities		(48	)
Investing Activities
Increase in loans		(10,999	)
Net cash used in investing activities		(10,999	)
Financing Activities
Qualified equity investment by parent company		15,000
Net cash provided by financing activities		15,000
Net increase in cash and cash equivalents		3,953
Cash and cash equivalents at beginning of year		61,329
Cash and cash equivalents at end of year	$	65,282

134

NOTE 21. TRANSACTIONS WITH RELATED PARTIES

Certain directors and officers (including their affiliates, families and entities in which they are principal owners) of Wesbanco and its subsidiaries are customers of, or suppliers to, those subsidiaries and have had, and are expected to have, transactions with the subsidiaries in the ordinary course of business. In addition, certain directors are also directors or officers of corporations that are customers of, or suppliers to, the Bank and have had, and are expected to have, transactions with the Bank in the ordinary course of business. In the opinion of management, such transactions are consistent with prudent banking practices and are within applicable banking regulations. Indebtedness of related parties aggregated approximately $12.4 million, $8.9 million and $10.6 million as of December 31, 2020, 2019, and 2018, respectively. During 2020, $11.8 million in related party loans were funded and $8.3 million were repaid or no longer related. At December 31, 2020, 2019 and 2018, none of the outstanding related party loans were past due 90 days or more, on non-accrual, or considered to be a TDR.

NOTE 22. REGULATORY MATTERS

The Federal Reserve Bank is the primary regulator for the parent company, Wesbanco. Wesbanco Bank is a state non-member bank jointly regulated by the FDIC and the West Virginia Division of Financial Institutions. Wesbanco is a legal entity separate and distinct from its subsidiaries and is dependent upon dividends from its subsidiary bank, Wesbanco Bank, to provide funds for the payment of dividends to shareholders, fund its current stock repurchase plan and to provide for other cash requirements. The payment of dividends by Wesbanco Bank to Wesbanco is subject to state and federal banking regulations. Under applicable law, bank regulatory agency approval is required if the total of all dividends declared by a bank in any calendar year exceeds the available retained earnings or exceeds the aggregate of the bank’s net profits (as defined by regulatory agencies) for that year and its retained net profits for the preceding two years. As of December 31, 2020, under FDIC regulations, Wesbanco could receive, without prior regulatory approval, a dividend of up to $306.3 million from Wesbanco Bank.

Wesbanco and Wesbanco Bank are also required to maintain non-interest bearing reserve balances with the Federal Reserve Bank. The average required reserve balance was $0.5 million during 2019. Wesbanco did not have a reserve requirement during 2020.  

Additionally, Wesbanco and Wesbanco Bank are subject to various regulatory capital requirements (risk-based capital ratios) administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a material adverse effect on Wesbanco’s financial results.

All bank holding companies and banking subsidiaries are required to have common equity Tier 1 (“CET1”) of at least 4.5%, core capital (“Tier 1”) of at least 6% of risk-weighted assets, total capital of at least 8% of risk-weighted assets, and a minimum Tier 1 leverage ratio of 4%. Tier 1 capital consists principally of shareholders’ equity; excluding items recorded in accumulated other comprehensive income, less goodwill and other intangibles. Total capital consists of Tier 1 capital plus the allowance for loan losses subject to limitation and trust preferred securities. The regulations also define “well-capitalized” levels of CET1, Tier 1 risk-based capital, total risk-based capital, and Tier 1 leverage capital as 6.5%, 8%, 10%, and 5%, respectively. Wesbanco and Wesbanco Bank were categorized as “well-capitalized” under the Federal Deposit Insurance Corporation Improvement Act at December 31, 2020 and 2019. There are no conditions or events since December 31, 2020 that management believes have changed Wesbanco’s “well-capitalized” category.

The Basel III capital standards, effective January 1, 2015 with a phase-in period ending January 1, 2019, establishes the minimum capital levels required under the Dodd-Frank Act, permanently grandfathers trust preferred securities as Tier 1 capital issued before May 19, 2010 for bank holding companies under $15 billion, and increases the capital required for certain categories of assets. A capital conservation buffer is also added to minimum capital standards that is required to be met to avoid restrictions on dividends, share repurchases, certain incentives and other restrictions. Including this capital conservation buffer, minimum levels of CET1, Tier 1 risk-based capital and total risk-based capital are defined as 7.0%, 8.5% and 10.5%, respectively.

Wesbanco currently has $132.2 million in junior subordinated debt in its Consolidated Balance Sheets presented as a separate category of long-term debt. For regulatory purposes, trust preferred securities totaling $130.0 million, issued by unconsolidated trust subsidiaries of Wesbanco underlying such junior subordinated debt, are considered Tier 2 capital in accordance with current regulatory reporting requirements.

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. Regulatory capital levels without the capital benefit at December 31, 2020 for both the Bank and Wesbanco would have continued to be greater than the amounts needed to be considered “well capitalized”, as the capital benefit approximated 30 to 50 basis points for three of the four regulatory ratios, while total risk-based capital would have been slightly higher without the transition.

135

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

							December 31, 2020							December 31, 2019
(dollars in thousands)	Minimum Value (1)			Well Capitalized (2)			Amount		Ratio			Minimum Amount (1)		Amount		Ratio			Minimum Amount (1)
Wesbanco, Inc.
Tier 1 leverage		4.00	%		5.00	%	$	1,617,413		10.51	%	$	615,814	$	1,441,738		11.30	%	$	510,306
Tier 1 capital to risk-weighted    assets		6.00	%		8.00	%		1,617,413		14.72	%		659,372		1,441,738		12.89	%		671,314
Total capital to risk-weighted    assets		8.00	%		10.00	%		1,931,414		17.58	%		879,162		1,691,764		15.12	%		895,086
Common equity Tier 1		4.50	%		6.50	%		1,472,929		13.40	%		494,529		1,441,738		12.89	%		503,486
Wesbanco Bank, Inc.
Tier 1 leverage		4.00	%		5.00	%	$	1,536,609		10.00	%	$	614,792	$	1,419,968		11.12	%	$	510,591
Tier 1 capital to risk-weighted    assets		6.00	%		8.00	%		1,536,609		14.04	%		656,732		1,419,968		12.74	%		668,951
Total capital to risk-weighted    assets		8.00	%		10.00	%		1,685,610		15.40	%		875,643		1,498,494		13.44	%		891,935
Common equity Tier 1		4.50	%		6.50	%		1,536,609		14.04	%		492,549		1,419,968		12.74	%		501,713

(1) Minimum requirements to remain adequately capitalized.

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

NOTE 23. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS

Presented below are the Condensed Balance Sheets, Statements of Income and Statements of Cash Flows for the parent company:

BALANCE SHEETS

	December 31,
(in thousands)	2020		2019
ASSETS
Cash and due from banks	$	223,224	$	170,854
Investment in subsidiaries—Bank		2,675,923		2,572,915
Investment in subsidiaries—Nonbank		9,731		9,170
Securities available-for-sale, at fair value		—		225
Other assets		38,194		38,393
Total Assets	$	2,947,072	$	2,791,557
LIABILITIES
Junior subordinated debt owed to unconsolidated subsidiary trusts	$	167,290	$	174,660
Dividends payable and other liabilities		23,045		22,976
Total Liabilities		190,335		197,636
SHAREHOLDERS’ EQUITY		2,756,737		2,593,921
Total Liabilities and Shareholders’ Equity	$	2,947,072	$	2,791,557

136

STATEMENTS OF INCOME

	For the years ended December 31,
(in thousands)	2020			2019			2018
Dividends from subsidiaries—Bank	$	64,000		$	102,000		$	86,000
Dividends from subsidiaries—Nonbank		1,200			4,471			486
Income from securities		(22	)		15			24
Other income		485			1,433			900
Total income		65,663			107,919			87,410
Interest expense		6,964			7,660			7,551
Other expense		5,415			8,807			7,940
Total expense		12,379			16,467			15,491
Income before income tax benefit and undistributed net income of subsidiaries		53,284			91,452			71,919
Income tax benefit		(2,471	)		(3,207	)		(3,739	)
Income before undistributed net income of subsidiaries		55,755			94,659			75,658
Equity in undistributed net income of subsidiaries		66,289			64,214			67,454
Net Income		122,044			158,873			143,112
Preferred stock dividends		2,644			—			-
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	119,400		$	158,873		$	143,112

The details of other comprehensive income and accumulated other comprehensive income are included in the consolidated financial statements.

STATEMENTS OF CASH FLOWS

	For the years ended December 31,
(in thousands)	2020			2019			2018
OPERATING ACTIVITIES
Net income	$	122,044		$	158,873		$	143,112
Adjustments to reconcile net income to net    cash provided by operating activities:
Equity in undistributed net income		(66,289	)		(64,214	)		(67,454	)
Decrease (increase) in other assets		121			(5,443	)		(3,612	)
Net securities losses (gains)		22			(19	)		36
Other—net		5,865			6,898			4,988
Net cash provided by operating activities		61,763			96,095			77,070
INVESTING ACTIVITIES
Proceeds from sales—securities available-for-sale		203			1,007			1,511
Acquisitions and additional capitalization of subsidiaries,    net of cash acquired		(35,000	)		62,112			37,309
Net cash (used in) provided by investing activities		(34,797	)		63,119			38,820
FINANCING ACTIVITIES
Repayment of junior subordinated debt		(6,702	)		(33,506	)		(17,519	)
Issuance of common stock		59			72			1,578
Issuance of preferred stock		144,484			—			—
Treasury shares purchased—net		(24,540	)		(10,211	)		(426	)
Dividends paid to common and preferred shareholders		(87,897	)		(66,572	)		(53,577	)
Net cash provided by (used in) financing activities		25,404			(110,217	)		(69,944	)
Net increase in cash and cash equivalents		52,370			48,997			45,946
Cash and cash equivalents at beginning of year		170,854			121,857			75,911
Cash and cash equivalents at end of year	$	223,224		$	170,854		$	121,857

137

NOTE 24. BUSINESS SEGMENTS

Wesbanco operates two reportable segments: (i) Community Banking and (ii) Trust and Investment Services. Wesbanco’s community banking segment offers services traditionally offered by full-service commercial banks, including commercial demand, individual demand and time deposit accounts, as well as commercial, mortgage and individual installment loans, and certain non-traditional offerings, such as insurance and securities brokerage services. The trust and investment services segment offers trust services as well as various alternative investment products including mutual funds. The market value of assets of the trust and investment services segment was approximately $5.0 billion, $4.7 billion and $4.3 billion at December 31, 2020, 2019 and 2018, respectively. These assets are held by Wesbanco, in fiduciary or agency capacities for their customers and therefore are not included as assets on Wesbanco’s Consolidated Balance Sheets.

Condensed financial information by business segment is presented below:

(in thousands)	Community Banking		Trust and Investment Services		Consolidated
For the Year Ended December 31, 2020
Interest and dividend income	$	541,277	$	—	$	541,277
Interest expense		61,797		—		61,797
Net interest income		479,480		—		479,480
Provision for credit losses		107,741		—		107,741
Net interest income after provision for credit losses		371,739		—		371,739
Non-interest income		101,850		26,335		128,185
Non-interest expense		338,526		16,319		354,845
Income before provision for income taxes		135,063		10,016		145,079
Provision for income taxes		20,932		2,103		23,035
Net income		114,131		7,913		122,044
Preferred stock dividends		2,644		—		2,644
Net income available to common shareholders	$	111,487	$	7,913	$	119,400
For the Year Ended December 31, 2019
Interest and dividend income	$	484,253	$	—	$	484,253
Interest expense		84,349		—		84,349
Net interest income		399,904		—		399,904
Provision for credit losses		11,198		—		11,198
Net interest income after provision for credit losses		388,706		—		388,706
Non-interest income		90,137		26,579		116,716
Non-interest expense		295,747		16,461		312,208
Income before provision for income taxes		183,096		10,118		193,214
Provision for income taxes		32,216		2,125		34,341
Net income available to common shareholders	$	150,880	$	7,993	$	158,873
For the Year Ended December 31, 2018
Interest and dividend income	$	414,957	$	—	$	414,957
Interest expense		67,721		—		67,721
Net interest income		347,236		—		347,236
Provision for credit losses		7,764		—		7,764
Net interest income after provision for credit losses		339,472		—		339,472
Non-interest income		75,653		24,623		100,276
Non-interest expense		250,338		14,886		265,224
Income before provision for income taxes		164,787		9,737		174,524
Provision for income taxes		29,367		2,045		31,412
Net income available to common shareholders	$	135,420	$	7,692	$	143,112

Total non-fiduciary assets of the trust and investment services segment were $4.1 million (including $1.8 million of trust customer intangibles), $4.2 million, and $4.6 million at December 31, 2020, 2019, and 2018, respectively. All other assets, including goodwill and the remainder of other intangible assets, were allocated to the Community Banking segment.

138

NOTE 25. CONDENSED QUARTERLY STATEMENTS OF INCOME (UNAUDITED)

The following tables set forth unaudited consolidated selected quarterly statements of income for the years ended December 31, 2020 and 2019.

	2020 Quarter Ended
(dollars in thousands, except per share amounts)	March 31,		June 30,		September 30,		December 31,			Annual Total
Interest and dividend income	$	142,448	$	134,694	$	133,657	$	130,478		$	541,277
Interest expense		22,286		15,681		13,064		10,766			61,797
Net interest income		120,162		119,013		120,593		119,712			479,480
Provision for credit losses		29,821		61,841		16,288		(209	)		107,741
Net interest income after provision for credit losses		90,341		57,172		104,305		119,921			371,739
Non-interest income		26,518		31,561		33,825		32,014			123,917
Net securities gains		1,491		1,299		787		691			4,268
Non-interest expense		91,333		85,502		89,943		88,069			354,845
Income before provision for income taxes		27,017		4,530		48,974		64,557			145,079
Provision for income taxes		3,621		42		7,669		11,703			23,035
Net income		23,396		4,488		41,305		52,854			122,044
Preferred stock dividends		—		—		—		2,644			2,644
Net income available to common shareholders	$	23,396	$	4,488	$	41,305	$	50,210		$	119,400
Earnings per common share—basic	$	0.34	$	0.07	$	0.61	$	0.75		$	1.78
Earnings per common share—diluted	$	0.34	$	0.07	$	0.61	$	0.75		$	1.77

	2019 Quarter Ended
(dollars in thousands, except per share amounts)	March 31,		June 30,		September 30,		December 31,		Annual Total
Interest and dividend income	$	119,053	$	119,543	$	117,348	$	128,309	$	484,253
Interest expense		20,692		21,083		21,228		21,345		84,349
Net interest income		98,361		98,460		96,120		106,964		399,904
Provision for credit losses		2,507		2,747		4,121		1,824		11,198
Net interest income after provision for credit losses		95,854		95,713		91,999		105,140		388,706
Non-interest income		27,116		28,247		26,715		30,318		112,396
Net securities gains		657		2,909		235		520		4,320
Non-interest expense		74,432		71,952		73,268		92,556		312,208
Income before provision for income taxes		49,195		54,917		45,681		43,422		193,214
Provision for income taxes		8,858		10,103		8,334		7,046		34,341
Net income	$	40,337	$	44,814	$	37,347	$	36,376	$	158,873
Earnings per common share—basic	$	0.74	$	0.82	$	0.68	$	0.60	$	2.83
Earnings per common share—diluted	$	0.74	$	0.82	$	0.68	$	0.60	$	2.83

139

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Wesbanco’s management carried out an evaluation, under the supervision and with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of Wesbanco’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the chief executive officer along with the chief financial officer concluded that Wesbanco’s disclosure controls and procedures as of December 31, 2020, are effective in timely alerting them to material information relating to Wesbanco (including its consolidated subsidiaries) required to be included in Wesbanco’s periodic filings under the Exchange Act.

No changes in Wesbanco’s internal control over financial reporting have occurred during our fiscal quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, Wesbanco’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on internal control over financial reporting and the audit report of Ernst & Young LLP, the Company’s independent registered public accounting firm, on internal control over financial reporting is included within this report immediately following “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” and is incorporated in this Item 9A by reference.

ITEM 9B. OTHER INFORMATION

None.

140

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item 10 is incorporated by reference to the applicable information in our Proxy Statement set forth under the headings Election of Directors, Nominees, Continuing Directors, Executive Officers of the Corporation, Corporate Governance, Delinquent Section 16(a) Reports and Audit Committee and certain other sections.

CODE OF ETHICS

Wesbanco has adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees, including Wesbanco’s Chief Executive Officer, Chief Financial Officer, Controller and other executive officers. Wesbanco’s “Code of Business Conduct and Ethics” can be found posted on our website at http://www.wesbanco.com in the “About Us” section under “Investor Relations” under “Governance Documents”. Wesbanco intends to disclose any changes or amendments to or waivers from this code of ethics on its website as well as the required filing of Form 8-K, under Item 5.05.

Wesbanco will provide a printed copy, free of charge, of Wesbanco’s Code of Ethics to any shareholder requesting such information. To obtain a copy of Wesbanco’s Code of Ethics, contact: John Iannone, Wesbanco, Inc., 1 Bank Plaza, Wheeling, WV 26003. (304) 905-7021

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 is incorporated by reference to the applicable information in our Proxy Statement set forth under the headings Summary Compensation Table, Meetings of Board of Directors and Committees and Compensation of Members, Compensation Committee Interlocks and Insider Participation, Compensation Committee Report, Compensation Discussion and Analysis and certain other sections.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 (other than the information provided below under the heading Equity Compensation Plan Information) is incorporated by reference to the applicable information in our Proxy Statement set forth under the headings Ownership of Securities by Directors, Nominees and Officers and Beneficial Owners of More Than 5% of the Common Stock of the Corporation.

The following table sets forth certain information with respect to securities authorized for issuance under our equity compensation plans as of December 31, 2020.

Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options		Weighted average exercise price of outstanding options		Number of securities remaining for future issuance under equity compensation plans
Equity compensation plans approved by security holders		706,745	$	30.67		35,711
Equity compensation plans not approved by security holders	None		None		None

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 is incorporated by reference to the applicable information in our Proxy Statement set forth under the headings Transactions with Directors and Officers and Election of Directors. Additional information concerning related party transactions is set forth in the Annual Report under Note 20, “Transactions with Related Parties” in the Consolidated Financial Statements.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item 14 is incorporated by reference to the applicable information in our Proxy Statement set forth under the heading Independent Registered Public Accounting Firm.

141

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) CERTAIN DOCUMENTS FILED AS PART OF THE FORM 10-K

(1) CONSOLIDATED FINANCIAL STATEMENTS: Reference is made to Part II Item 8, of this Annual Report on Form 10-K.

(2) FINANCIAL STATEMENT SCHEDULES: No financial statement schedules are being filed since the required information is inapplicable or the information is presented in the Consolidated Financial Statements or related Notes.

(3) EXHIBIT LISTING Exhibits listed in the Exhibit Index of this Annual Report on Form 10-K are filed herein or are incorporated by reference.

ITEM 16. FORM 10-K SUMMARY

None.

142

EXHIBIT INDEX

Exhibit Number	Document	Location
2.1	Agreement and Plan of Merger dated November 13, 2017 by and between Wesbanco, Inc., Wesbanco Bank Inc., First Sentry Bancshares, Inc. and First Sentry Bank, Inc.	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on November 13, 2017.
2.2	First Amendment to Agreement and Plan of Merger dated January 30, 2018 and between Wesbanco, Inc., Wesbanco Bank Inc., First Sentry Bancshares, Inc. and First Sentry Bank, Inc.	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on February 27, 2018.
2.3	Agreement and Plan of Merger dated April 20, 2018 between Wesbanco, Inc., Wesbanco Bank, Inc., Farmers Capital Bank Corporation and United Bank & Capital Trust Company.	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on April 20, 2018.
2.4	Agreement and Plan of Merger dated July 23, 2019 between Wesbanco, Inc., Wesbanco Bank, Inc., Old Line Bancshares, Inc. and Old Line Bank.	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on July 23, 2019.
3.1	Bylaws of Wesbanco, Inc. (As Amended and Restated February 24, 2011).	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on February 25, 2011.
3.2	Amended and Restated Articles of Incorporation of Wesbanco, Inc.	Incorporated by reference to Exhibit 3.1 of Form 8-K filed by the Registrant with the Securities and Exchange Commission on August 11, 2020.
4.1	Specimen Certificate of Wesbanco, Inc. Common Stock. (P)	Incorporated by reference to a prior Registration Statement on Form S-4 under Registration No. 33-42157 filed by the Registrant with the Securities and Exchange Commission on August 9, 1991.
4.2	Junior Subordinated Indenture dated June 19, 2003 entered into between Wesbanco, Inc., as issuer and The Bank of New York, as Trustee and Amended and Restated Declaration of Trust of Wesbanco, Inc. Capital Trust II.	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on August 13, 2003.
4.3	Indenture dated June 26, 2003 entered into between Wesbanco, Inc., as issuer and U.S. Bank National Association, as Trustee and Amended and Restated Declaration of Trust of Wesbanco, Inc. Capital Statutory Trust III.	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on August 13, 2003.
4.4	Indenture dated June 17, 2004 entered into between Wesbanco, Inc., as issuer and Wilmington Trust Company, as Trustee and Amended and Restated Declaration of Trust of Wesbanco Capital Trust IV dated June 17, 2004.	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on August 9, 2004.
4.5	Indenture dated June 17, 2004 entered into between Wesbanco, Inc., as issuer and Wilmington Trust Company, as Trustee and Amended and Restated Declaration of Trust of Wesbanco Capital Trust V dated June 17, 2004.	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on August 9, 2004.
4.6	Indenture dated March 17, 2005 entered into between Wesbanco, Inc. and Wilmington Trust Company, as Trustee and Amended and Restated Declaration of Trust of Wesbanco Capital Trust VI dated March 17, 2005.	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on March 18, 2005.
4.7	Description of Securities.	*
4.8	Deposit Agreement, dated August 11, 2020, by and among Wesbanco, Inc., Computershare Inc. and Computershare Trust Company, N.A. acting jointly as the depositary, and the holders from time to time of the depositary receipts described therein.	Incorporated by reference to Exhibit 4.1 of Form 8-K filed by the Registrant with the Securities and Exchange Commission on August 11, 2020.
4.9	Specimen of Certificate representing the Series A Preferred Stock.	Incorporated by reference to Exhibit 4.2 of Form 8-K filed by the Registrant with the Securities and Exchange Commission on August 11, 2020.

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Exhibit Number	Document	Location
4.10	Form of Depositary Receipt.	Incorporated by reference to Exhibit 4.1 of Form 8-K filed by the Registrant with the Securities and Exchange Commission on August 11, 2020.
10.1	Wesbanco, Inc. Incentive Bonus, Option and Restricted Stock Plan as adopted February 13, 1998 and as amended and restated February 25, 2010 and February 23, 2017. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on April 20, 2017.
10.2	Employment Agreement, dated November 30, 2001, by and between Wesbanco Bank, Inc., Wesbanco, Inc. and Brent E. Richmond. **	Incorporated by reference to a prior Registration Statement on Form S-4 under Registration No. 333-74814 filed by the Registrant with the Securities and Exchange Commission on December 10, 2001.
10.3	Employment Agreement dated June 30, 2001, by and between Wesbanco Bank, Inc., Robert H. Young and Wesbanco, Inc. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on March 29, 2002.
10.4	Letter Agreement and Committed Line of Credit Note, dated September 5, 2014, between Wesbanco, Inc. and PNC Bank, National Association.	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on September 8, 2014.
10.5	Form of Amended and Restated Change in Control Agreement by and between Wesbanco, Inc., Wesbanco Bank, Inc., and Robert H. Young. **	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on August 5, 2005.
10.6	Form of Amended and Restated Salary Continuation Agreement – With Change in Control Provision by and between Wesbanco Bank, Inc. and executive officers (along with their related ten year benefit at age 65) as follows: Robert H. Young ($40,000) and Brent E. Richmond ($12,000). **	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on August 5, 2005.
10.7	Wesbanco, Inc. Deferred Compensation Plan – For Directors and Eligible Employees (as amended). **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on March 10, 2006.
10.8	Form of Amended and Restated Change in Control Agreement by and between Wesbanco, Inc., Wesbanco Bank, Inc., Brent E. Richmond, Michael L. Perkins and Jayson M. Zatta. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on April 28, 2006.
10.9	Form of Executive Compensation Amendment Agreement by and between Wesbanco, Inc., Wesbanco Bank, Inc., and Robert H. Young. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on March 10, 2009.
10.10	Form of Executive Compensation Amendment Agreement by and between Wesbanco, Inc., Wesbanco Bank, Inc., and Robert H. Young. **	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on August 10, 2009.
10.11	Form of Wesbanco, Inc. Incentive Bonus, Option & Restricted Stock Plan – Stock Option Agreement. **	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on July 30, 2010.
10.12	Form of Wesbanco, Inc. Incentive Bonus, Option & Restricted Stock Plan – Restricted Stock Agreement. **	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on July 30, 2010.
10.13	Form of Amended and Restated Employment Agreement by and between Wesbanco, Inc., Wesbanco Bank, Inc. and Jonathan D. Dargusch. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on June 5, 2013.
10.14	Form of Change in Control Agreement by and between Wesbanco, Inc., Wesbanco Bank, Inc., and executive officers: Jonathan D. Dargusch and Anthony F. Pietranton. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on June 5, 2013.
10.15	Amended and Restated Employment Agreement, dated April 24, 2014, by and between Wesbanco Bank, Inc., Todd F. Clossin and Wesbanco, Inc.	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on April 24, 2014.

144

Exhibit Number	Document	Location
10.16	Restricted Stock Agreement by and between Wesbanco, Inc. and Todd F. Clossin. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on October 24, 2013.
10.17	Wesbanco, Inc. KSOP, Amended and Restated, effective January 1, 2014. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on February 27, 2015.
10.18	First Amendment to the Wesbanco, Inc. KSOP, effective January 1, 2014. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on February 27, 2015.
10.19	Second Amendment to the Wesbanco, Inc. KSOP, effective January 1, 2014. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on February 27, 2015.
10.20	Separation Agreement and Release and Waiver of Claims, dated October 29, 2014, by and among ESB Financial Corporation, ESB Bank, Charlotte A. Zuschlag, Wesbanco, Inc. and Wesbanco Bank, Inc. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on February 10, 2015.
10.21	Employment Agreement, dated October 29, 2014, by and between Wesbanco Bank, Inc., Charlotte A. Zuschlag, and Wesbanco, Inc. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on February 10, 2015.
10.22	Non-competition Agreement, dated October 29, 2014, by and between Wesbanco, Inc., Wesbanco Bank, Inc. and Charlotte A. Zuschlag .**	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on February 10, 2015.
10.23	Form of Employment Agreement by and between Wesbanco Bank, Inc., Wesbanco Inc., and executive officers (effective date): Jayson M. Zatta (effective March 1, 2015) and Anthony F. Pietranton (effective January 9, 2015) **	Incorporated by reference to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on July 30, 2015.
10.24	Wesbanco, Inc. Administrative Rules for the Total Shareholder Return Plan. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on November 24, 2015.
10.25	Form of Wesbanco, Inc. Incentive Bonus, Option & Restricted Stock Plan—Total Shareholder Return Agreement. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on February 26, 2016.
10.26	Third Amendment to the Wesbanco, Inc. KSOP, effective September 9, 2016. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on February 27, 2018.
10.27	Form of Wesbanco, Inc. Incentive Bonus, Option & Restricted Stock Plan—Performance Restricted Stock Agreement.**	Incorporated by reference to Exhibit 10.2 to Form 10-Q filed by the Registrant with the Securities and Exchange Commission on July 31, 2017.
10.28	Form of Change in Control Agreement by Wesbanco Inc., Wesbanco Bank, Inc. and Ivan Burdine. **	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on June 5, 2013.
10.29	Fourth Amendment to the Wesbanco, Inc. KSOP effective April 1, 2018. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on March 1, 2019.
10.30	Fifth Amendment to the Wesbanco, Inc. KSOP effective August 20, 2018. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on March 1, 2019.
10.31	Amended and Restated Committed Line of Credit Note between Wesbanco, Inc. and PNC Bank, National Association.	Incorporated by reference to Form 8-K filed by the Registrant with the Securities and Exchange Commission on September 6, 2019.

145

Exhibit Number	Document	Location
10.32	Employment agreement, dated July 23, 2019, by and between Wesbanco Bank, Inc., James W. Cornelsen and Wesbanco, Inc. **	Incorporated by reference to Exhibit 10.1 to Form S-4 filed by the Registrant with the Securities and Exchange Commission on August 23, 2019.
10.33	Sixth Amendment to the Wesbanco, Inc. KSOP effective January 1, 2020.**	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on February 28, 2020.
10.34	Seventh Amendment to the Wesbanco, Inc. KSOP effective November 22, 2019. **	Incorporated by reference to Form 10-K filed by the Registrant with the Securities and Exchange Commission on February 28, 2020.
10.35	Amendment to Loan Documents between Wesbanco, Inc. and PNC Bank, National Association.	Incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Registrant with the Securities and Exchange Commission on August 28, 2020.
11	Computation of Earnings Per Common Share.	Computation of earnings per common share is set forth under Note 3, “Earnings Per Common Share” of this Annual Report on Form 10-K.
21	Significant Subsidiaries of the Registrant.	*
23	Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP.	*
24	Power of Attorney.	*
31.1	Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-15(e) or Rule 15d-15(e).	*
31.2	Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-15(e) or Rule 15d-15(e).	*
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	*
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).	*
101.SCH	Inline XBRL Taxonomy Extension Schema Document	*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	***
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	***
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	***
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	***
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).	***

* Filed herewith

** Indicates management compensatory plan, contract, or arrangement

*** Filed electronically

(P) Paper Filed

146

SIGNATURES

Pursuant to the Requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 26, 2021.

	WESBANCO, INC.
By:	/s/    Todd F. Clossin
	Todd F. Clossin
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated, on February 26, 2021.

By:	/s/    Todd F. Clossin
	Todd F. Clossin
	President, Chief Executive Officer, and Director
	(Principal Executive Officer)

By:	/s/    Robert H. Young
	Robert H. Young
	Senior Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

By:	/s/    Daniel K. Weiss, Jr.
	Daniel K. Weiss, Jr.
	Senior Vice President and Chief Accounting Officer
	(Principal Accounting Officer)

By:	/s/    Christopher V. Criss
	Christopher V. Criss
	Chairman of the Board

The Directors of Wesbanco (listed below) executed a power of attorney appointing Todd F. Clossin their attorney-in-fact, empowering him to sign this report on their behalf.

By:	/s/    Todd F. Clossin
	Todd F. Clossin
	Attorney-in-fact

Stephen J. Callen	Jay T. McCamic
James W. Cornelsen	F. Eric Nelson, Jr.
Michael J. Crawford	Ronald W. Owen
Abigail M. Feinknopf	Gregory S. Proctor, Jr.
Denise Knouse-Snyder	Joseph R. Robinson
D. Bruce Knox	Kerry M. Stemler
Lisa A. Knutson	Reed J. Tanner
Gary L. Libs	Charlotte A. Zuschlag

147