Please note this event is being recorded. I would now like to turn the conference over to John Iannone, Senior Vice President of Investor Relations. Please go ahead.
Thank you. Good afternoon. Welcome to WesBanco Inc's third quarter 2026 earnings conference call. Leading the call today are Jeff Jackson, President and Chief Executive Officer, and Dan Weiss, Senior Executive Vice President and Chief Financial Officer. Today's call, an archive of which will be available on our website for one year, contains forward-looking information.
Cautionary statements about this information and reconciliations of non-GAAP measures are included in our earnings-related materials issued yesterday afternoon, as well as our other SEC filings and investor materials. These materials are available on the investor relations section of our website, wesbanco.com, and all statements speak only as of October 22nd, 2026, and WesBanco undertakes no obligation to update them. I would now like to turn the call over to Jeff. Jeff?
Thanks, John, and good afternoon, everyone. Today, we'll review our third quarter performance and share our current outlook for fourth quarter. Our third quarter results demonstrate continued momentum across our franchise, particularly in three areas. We delivered strong sequential quarter and year-over-year loan growth. We saw accelerating growth in our targeted expansion markets. And we drove solid profitability through disciplined execution and positive operating leverage.
Turning to our financial performance, our third quarter results reflect the continued strength of WesBanco's disciplined growth strategy and relationship-focused banking model. For the quarter ending September 30th, 2026, we reported net income available to common shareholders of $86 million, excluding merger and restructuring charges, or $0.89 per share. Our year-to-date results demonstrate how disciplined growth and improving operating leverage are translating into stronger profitability.
Adjusted earnings per share increased nearly 7% to $2.72, while our return on average tangible common equity remained nearly 17%. We also improved return on average assets to 1.3% and lowered our efficiency ratio to 52%. Our capital position also remains solid with a CET1 ratio of 10.6%, which continues to provide flexibility to support our growth expectations. The defining driver of our momentum this quarter was once again strong loan growth. Total loans increased 5.1% year-over-year and 8.7% annualized sequentially as our teams converted pipeline opportunities across our footprint.
C&I growth was particularly strong, increasing 11% year-over-year and 16% quarter-over-quarter annualized. Through the first nine months of the year, our commercial teams generated record loan production of nearly $4 billion, a 70% increase from prior year period. As we mentioned last quarter, we expected developers to continue to seek permanent financing and the sale of properties during the third quarter, but at a slower pace than the first half of the year. However, we experienced another sequential quarter increase as CRE payoffs totaled approximately $370 million during the third quarter, which caused nearly a 1% headwind to loan growth and a $1 billion headwind over the past 12 months.
Despite that headwind, we generated $1 billion of net organic loan growth over the past year, demonstrating the soundness of our strategy and strength of our teams and our markets. A recent mid-Atlantic win illustrates how our relationship-focused model is contributing to this momentum. A cross-functional team developed a relationship with a prominent family-owned business in the Baltimore region and ultimately secured an eight-figure commercial loan, a seven-figure deposit relationship, and treasury management services.
More importantly, it positions us to compete for the company's broader banking relationship. This is a great example of how collaboration across our teams can turn individual relationships into meaningful multi-product opportunities. Reflecting our team's ability to successfully convert loan opportunities, our commercial pipeline was $1.8 billion as of September 30th, with half of this from our loan production offices and former Premier markets.
The pipeline has remained stable in the few weeks since the quarter end, giving us confidence in our ability to outpace CRE payoffs and deliver on our outlook of mid-single-digit loan growth in 2026. We remain excited about the opportunities in our targeted expansion markets of Florida and Tennessee as our new teams have hit the ground running. Since launching in the second quarter, our Florida team has developed $300 million in new loan relationships and a similar-sized pipeline.
While the early majority of closed loans are CRE and owner-occupied related, nearly a third of the C&I across the various industries like healthcare, wholesale, and transportation. We are encouraged by the breadth of diversified opportunities we're seeing in South Florida and continue to evaluate additional areas where we can leverage our relationship banking model. Further, we remain on track to open our financial centers in Fort Lauderdale, West Palm, and Naples during the first half of 2027. Tennessee provides another strong proof point of our expansion strategy.
Since entering the market in 2023, we have organically built a loan portfolio of more than $750 million, now representing nearly 4% of our total loans. We opened another loan production office in Knoxville, June of last year, and recently expanded our national presence, adding a highly experienced team of approximately 20 bankers and staff with deep roots in community banking. In less than three months, the team has leveraged their extensive networks to close $100 million in new loan relationships, nearly half of which are C&I across industries like healthcare, recreation and entertainment, and finance and insurance.
Finally, we're proud to have been recognized recently by Forbes as one of the world's top performing banks, and to have earned our ninth consecutive Outstanding Community Reinvestment Act rating from the FDIC. Both recognitions reflect the strength of our franchise and the commitment of our teams to delivering for our customers, communities, and shareholders. I would now like to turn over the call to Dan to walk through the financials and outlook in more detail. Dan?
Thanks, Jeff, and good afternoon. For the third quarter, we reported GAAP net income available to common shareholders of $85 million or $0.88 per share. When excluding restructuring of merger-related expenses, third quarter net income was $86 million or $0.89 per share. To highlight a few of the third quarter's year-over-year accomplishments, we grew adjusted earnings per share nearly 7%, driven by our disciplined growth strategy that delivered strong annualized loan growth of nearly 9%. We posted record fee income levels across several categories and maintained our efficiency ratio in the low 50% range.
We ended the quarter with record total assets of $28.5 billion, which included total portfolio loans of $19.9 billion and securities of $4.5 billion, with the securities book representing approximately 16% of total assets. Total portfolio loans increased 5.1% year- over- year due to our organic growth of nearly $1 billion. Based on our current pipeline and strong loan production, we expect to generate mid-single-digit growth for the year, despite the elevated commercial real estate payoffs. Deposits of $21.6 billion increased 1.5% year- over- year and were roughly flat sequentially as higher cost CDs migrated to money markets and other transaction accounts.
As we mentioned previously, we expect our loan growth to outpace deposits in the near term as we lead with lending in our new expansion markets. That said, our 91% average loan to deposit ratio positions our balance sheet well for additional loan growth in the coming quarters. Our credit quality metrics remain solid. Most notably, our criticized and classified loans decreased $93 million or 55 basis points from the second quarter to represent 3.19% of total loans.
This significant improvement in credit quality resulted in 4 basis point reduction in the allowance for credit losses to total portfolio loans at September 30th to 1.08% of total loans, or $215 million. Net interest income for the third quarter was $227 million, an increase of $10.2 million, or 4.7% year- over- year, driven by loan growth, upward loan repricing, and higher security yields. This increase was a significant contributor to the 5% year- over- year growth in both pre-tax and net earnings and the 7% increase in adjusted earnings per share.
The third quarter net interest margin of 360 basis points improved 7 basis points year- over- year, primarily due to lower funding costs, and was flat for the second quarter when excluding the additional 3 basis points of accelerated accretion from an early payoff during the second quarter. Total deposit funding costs, including non-interest-bearing deposits, declined 12 basis points year- over- year to 180 basis points, reflecting the runoff of the higher cost CDs. On a sequential quarter basis, increased just a couple of basis points, demonstrating our discipline over deposit pricing.
Turning to fee income, we continue to see great traction across our franchise for our fee-based services as we earned record fees from service charges on deposit products, digital banking services, and treasury management. For the third quarter, non-interest income increased $1 million, or 2.2% year- over- year, to $46 million. When excluding the impact of net security gains and losses, fee income increased 5.4% year- over- year. The third quarter reflects a full quarter's benefit of approximately $750,000 from the increase in deposit account fees that we implemented in June.
Treasury management net revenues increased approximately 40% year-over-year to $2.6 million, primarily driven by increased monthly spend from our 170 multi-card customers, which is up over 80% year-over-year. While residential mortgage origination volume increased 24% year-over-year to $300 million, we retained the majority of the volume in the portfolio, which caused mortgage banking income to decrease almost $2 million from the prior year period, when also combined with a negative fair value adjustment of approximately $1 million.
Non-interest expense, excluding restructuring and merger-related costs for the third quarter of $150 million, increased 3.7% year-over-year and 1.4% sequentially primarily due to higher salaries and wages, which increased due to the recent hiring efforts in Florida and Nashville, as well as mid-year merit increases. Employee benefits during the third quarter included a $2 million reduction in sequential quarter deferred comp expense, as well as a $2 million one-time refund from our employee healthcare prescription rebate program.
We anticipate the ongoing prescription plan refund to be roughly $750,000 per quarter. Our CET1 ratio, at 10.6% as of September 30th, was within our targeted range of 10.5%-11%, reflecting our continued strong loan growth. We did not repurchase any shares during the third quarter, and we continue to anticipate our CET1 to remain in that targeted range for the fourth quarter. Turning to the outlook, we currently anticipate two Fed rate hikes, one in December, which will have no meaningful impact on 2026 results, and another hike in March of 2027.
Earning asset yields should continue to benefit from backfill repricing of loans and securities upward, while deposit pricing will also modestly increase, as we've recently adjusted our top-tier money market and CD rates. With the third quarter loan growth funded with a heavier mix of higher cost wholesale borrowings, we anticipate our net interest margin for the fourth quarter to potentially be 1 basis point or 2 basis points below the 360 basis points that we reported here in the third quarter. This assumes, among other things, that competition for loans and deposits remains stable, as well as an upward-sloping yield curve.
We also expect strong deposit growth in the fourth quarter, and to the extent we experience more than modeled, this could potentially benefit margin. There are no meaningful changes to our fee income and operating expense outlooks that we provided last quarter. We still anticipate fourth quarter fee income to grow in that 3%-5% range year-over-year, and operating expenses to be in that $153 million range after adding back the one-time credits recognized in employee benefits during the third quarter.
The provision for credit losses will depend upon changes to macroeconomic forecasts and qualitative factors and various credit quality metrics, including potential charge-offs, criticized and classified loan balances, delinquencies, changes in prepayment speeds, and of course, future loan growth. Finally, we currently anticipate our full-year effective tax rate to be approximately 21%. Operator, we're now ready to take questions. Would you please review the instructions?
We will now begin the question- and- answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourselves to one question and one follow-up, and then you can return to the queue. At this time, we will pause momentarily to assemble our roster. The first question today comes from Will Jones with KBW. Please go ahead.
Hey, great. Good afternoon, guys.
Hey, Will. How is it going?
Hey, we are doing good. I wanted to ask, just maybe on deposit growth. I was maybe a bit surprised to see balances flat this quarter. It felt like you were speaking very positively, that there was some momentum that we could see in this quarter and moving into fourth quarter. Was there any timing that may be pushing that kind of growth momentum into the fourth quarter? If you could just walk us maybe through some of the deposit dynamics you saw this quarter, that would be great. Thanks.
Yeah, sure. We obviously, as everybody knows, there is tough competition out there. What I would say is in the third quarter, we were able to generate about 8,400 new customer accounts, and so felt really good traction there. Also, when you look at we've closed 37 branches, so I think if I was to put it in a different way, we grew deposits, but obviously when closing 37 branches, you're going to get a little bit of runoff. And so I feel very good about where we ended up, even though it was flat.
What I would say is some of it was delayed, and so I can tell you this quarter, we're already up a couple of $100 million and feel like we will finish the quarter really, really strong as it relates to deposit growth. We've got several different initiatives that are working very well. And once again, we're up a couple of $100 million as we speak right now. Feel like we'll continue to climb toward the end of the quarter. But once again, I feel very good where we're at. Obviously, our loan deposit ratio in the low- 90s gives us plenty of room to continue to run, but it is obviously top of mind and feel like fourth quarter results will show we've done a good job on deposit growth.
Yeah, that's great color. I appreciate all that. I guess maybe just within that train of thought, where would you be okay taking the loan to deposit ratio to? What is the appropriate leveraging of the balance sheet that you guys would be okay to see there?
Yeah. I think mid-90s is where we'd probably be comfortable with, somewhere around 95-ish%. And so today, we're obviously several percentage points lower than that. But once again, I think mid-90s would be kind of where we'd want to max out around.
Yeah. Okay. Thanks. Then maybe, Dan, one for you on the margin. I heard you maybe a couple of basis points of compression coming, but still kind of in the 360 basis points, ballpark. You have two hikes in your forecast. Do you feel comfortable being able to kind of defend this level as we move through the balance and into 2027? Assuming we get a couple more Fed hikes here, or is there a point in time where deposit competition becomes the more prevailing narrative and you are okay to see a little bit of margin compression if it means continuing to see NII growth?
Yeah, you nailed it there. The 360 basis points is very defendable as we look into 2027, for sure. Certainly lots of asset back book repricing to occur between securities and loans. Every quarter I typically kind of throw out a few numbers, and they haven't changed much really from last quarter. That's on a securities book, we're still looking at about $250 million in cash flows kicking off that securities book per quarter. So it's about $1 billion on an annual basis. That'll be repricing upward about 180 basis points from 330 basis points to about 5.10%, somewhere just north of 5%. Then we've also got certainly loan repricing. Think about our fixed rate maturities on the commercial book, about $400 million.
That's repricing at a weighted average rate over the next year, that $400 million, from 4.28%, and that would be coming on at least about 200 basis points or so higher, maybe 225 basis points, given where we're seeing pipelines and rates today. Then we also have within that large variable commercial book, that reprices within every three months, another almost $400 million, $350 million or so that's actually repricing in the next 12 months from a weighted average rate of 375 basis points. So that will move upward as much as 250 basis points- 275 basis points.
So those would be kind of, I would say, the tailwinds that really are going to help support that kind of stabilized 360 basis points margin over the coming quarters. But I think really what we expect to see is an opportunity on the— I think it really is going to come down somewhat as well to deposit pricing to your point and our success in growing deposits. I will also mention on the securities book, right now we are seeing rates a bit better than 5.10%. So there is a little bit being put on a little heavier than that, but just want to be conservative.
The next question comes from Manuel Navas with Piper Sandler. Please go ahead. Manuel, you are live. Okay, go ahead.
Yeah. I really like hearing how strong some of your new markets are doing. Can you just also talk a little bit about, you brought up that PFC markets are a good part of the pipeline. Can you just talk about how some of the core markets are doing and kind of expectations there for growth?
Yeah, our Cincinnati, Columbus market is doing incredibly well. They just surpassed $1 billion in production this year, an all-time record there. They are seeing tremendous growth in those markets. I would also say our Mid-Atlantic market is doing really well also. I believe they also had a record production this year as well. I would say those two markets have really done a really nice job in the core markets. As it relates to our expansion markets, I have mentioned several times, and we mentioned in the script, they have taken off.
As you may recall, we opened Tennessee back kind of in 2022, 2023. I am actually going down there next month because they have surpassed $1 billion in production in three years. So with about over $700 million in loans outstanding and starting a pretty good deposit base. So very pleased with our core markets and also our new markets as well, and really think that we should continue to see very strong growth as we wrap up this year and going into next year.
All right. That is great to hear. What is next? Where would you hire next? Where is kind of the pipeline best right now in terms of the talent side? Where would you kind of be focused next?
We are always looking for great talented bankers. I think adding to our healthcare team, we may add one or two there. That has also been another amazing business for us. I should have mentioned it, bringing in about a great amount of deposits and fees. I would say adding healthcare. Still looking to add in Florida, one or two here or there. That has been a really good market for us to continue to hire. There is some disruption down in Florida that we are able to take advantage of.
As you may recall, the people I hired in Florida, I have known for many years. Many of them have worked for me in the past. So continuing to leverage those connections, I think is really important. But right now, those are kind of the markets. All the other markets, we are looking for great talented bankers, but I would say in healthcare and also back in Florida, looking to add a few more people there.
We are always open to looking at new LPOs, but as I have said before, it really goes back to the talent and where it has worked the best and we have executed on and been successful is where we have known people in those markets. If we run across some other teams in other places, we will obviously take a look. But right now, I would say those two areas are where we are focused in hiring.
Okay. Finally, my last question is, you are talking about leading with lending in some of these new markets and for deposits to kind of flow in. What is kind of the timeframe for that? You are expecting to have better funding six months, nine months? What should we think about in that process where the deposits follow after the loan comes out?
Yeah. So related to the LPOs, specifically Florida and Tennessee, I would say Florida, we should have three branches open sometime near the end of first quarter. I would expect deposit flow to pick up. I will tell you, we have already got a pretty steady deposit pipeline in Florida. So, I think this quarter, next quarter, we will see good flow of deposits come into Florida. Tennessee, we just opened the Chattanooga branch earlier this year. We are working on Knoxville and Nashville, I would think by first quarter. So I would say sometime mid-year, next year, you would really start to see the LPOs producing strong deposits. But I think there is a chance they could do it beforehand.
The next question comes from Karl Shepard with RBC Capital Markets. Please go ahead.
Hey, guys. How are you doing?
Hey, Karl. How's it going?
Hey, Karl.
Doing well. Just want to ask about loan growth again. I know the production trends continue to be really solid, and I think payoffs are still a little bit elevated, but—
Yep.
—do you see anything on the horizon that would kind of knock you off this type of production level? There's just so much opportunity in Florida and Nashville ahead of you.
The only thing that could knock us off would be heavier CRE payoffs. The pipeline remains very solid. If you look at Florida and Nashville's just starting to hit their stride this quarter, so I would expect them to be a big contributor this quarter. Florida is hitting its stride. The overall company pipeline is very strong. So it would have to take, I would say, heavier CRE payoffs or payoffs in general, or some probably massive interest rate hike, which we don't have forecasted, but I think if you had 150 basis points, 200 basis point hike, that would obviously slow down lending.
I don't foresee that. You never know. I think we've got the loan engine producing at a very high rate. I would say this year, if you look at what our total production is going to be, it probably will be near $5 billion. If you roll back to 2024, we were doing $2 billion. So that's how much we've increased our loan production by more than doubling it in two years. I feel like next year we could exceed that for sure. Just feel like we're in a really great place for loan production.
Okay, that's great. As a follow-up, I think you've talked about Florida being a $2 billion bank. I asked last quarter on the Nashville opportunity. Do you want to size that and just help us understand kind of the runway ahead of you in that market?
Yeah, sure. So, when I talk about $2 billion, I just want to be clear, that's adding loans and deposits together. Yeah, absolutely. So I could see Florida ending this year, and once again, that prediction was sometime in 2028, just to be clear. But I could see them ending the year with about $500 million in loans, and then adding from there and growing deposits, several $100 million next year, so that by the end of next year, obviously, I think they would be over $1 billion, as a franchise in Florida, probably more.
Then, sometime in 2028, hitting that $2 billion number. As it relates to Tennessee, as I mentioned before, we're already $750 million in loans in Tennessee, with, I believe, around $100 million+ or maybe more in deposits. I could see that by 2028, just the Nashville market being $1 billion, and the State of Tennessee being that $1.5 billion- $2 billion market, sometime in 2028 as well.
Okay.
The next question comes from Russell Gunther with Stephens. Please go ahead.
Hey, good afternoon, guys.
Hey, Russell. How's it going?
Hey, Russell.
Hey, Jeff. Hey, Dan. Thanks, guys. I wanted to ask first on expenses. I hear you on the reiterated expectations for the fourth quarter. I believe it is about this time in the year where you guys take a look at your branch network for potential incremental optimization. I wanted to get a sense for if that is part of the strategy going forward, if there is still room to reduce that brick-and-mortar and either drop some expense saves to the bottom line or contemplate any other strategic optionality around the branch network.
Yeah, I will start with the branch network, and then I will let Dan get into the total expenses. Yes, the answer to your question is there is some more options for optimization for our branch network. We are looking at that. I think you could potentially see some two for one, three for ones. I do see more cost saves that we would likely announce, potentially, with our fourth quarter earnings.
We are kind of finalizing some things there, and so could be some good opportunities for us. Probably not nearly the amount that we have done already this year. I would think mid-single digits to low double digits at this point. But that would be some good cost saves for us that we are looking at and would probably finalize by the end of this quarter. Dan, you want to talk about expenses overall?
Yeah, I will just also add on to your comments there, Jeff, we still have a few back office properties with some vacant floors and still looking to see how we can optimize some of that as well, which could have some benefit for 2027. But overall, the expense guidance that we provided actually last quarter, stands here for the third quarter as well as fourth quarter. As I explained there through my prepared commentary, really expecting them to come in right around $153 million. The way you kind of get back to that from the $150 million from what we reported here in the third quarter is by really adding back that $2 million in healthcare rebate.
There is another, call it, million or so in deferred comp expense that kind of wasn't in the third quarter run rate that would likely show up in the fourth quarter run rate. So that's how we get to that guide of $153 million. Most of it's coming through that employee benefits line item. There's always a little bit of true-up on the salary side as we get final numbers near the end of the year for annual bonus payments and things like that. But that's where I see most of the movement on the expense side is in that employee benefits line, and it would be increasing.
Got it. Okay. Helpful color. Thank you both. Second question would just be to follow up on the margin discussion. Sounds like you are willing to flex the loan-to-deposit ratio a little bit more here. So Dan, maybe just as a result, how are you thinking about deposit betas in this rising rate environment? What kind of underpins your assumption to defend that 360 basis points NIM on the funding side?
Yeah. So on the deposit beta front, we're modeling about a 50% deposit beta, if that's helpful to you, Russell. Certainly have a number of initiatives out there, including potentially higher rates on CD products, money market, private client savings accounts, et c. So we do think that from that perspective, we're going to see our funding costs continue to rise as we would expect. But at the same time, asset repricing is expected to kind of entirely mute that and/or potentially offset that somewhat.
So that's how we get to that kind of relatively stable 360 basis points margin. A lot of that also is dependent, though, upon our success in growing deposits and relative to wholesale funding and certainly that funding in general, deposit gathering, particularly new customers tends to cost a little more than what your kind of weighted average rate of deposits are today. But we do still anticipate that deposit growth to come in at a similar mix, so about 24%, 25% non-interest bearing, the other 75% interest bearing. If that's—
Got it. Okay. Yeah. No, that's very helpful, Dan. Thank you guys for taking my question.
The next question comes from Daniel Tamayo with Raymond James. Please go ahead.
Thank you. Good afternoon, everybody. Maybe just to follow up, Dan, for you on the expense side, but looking out a little bit further. You obviously had a lot of hires in 2026. You've been talking about 3%-5% year-over-year for the back half of this year. Do you think that kind of plays out next year as well as we look into 2027? Is that the right way to think about it? Or with maybe fewer hirings, is there a chance that slows? Just curious how you're thinking about those kind of the longer term.
Yeah, Daniel. What I would tell you is we're still in process of finalizing our budget for 2027, particularly over expenses. I want to be careful in my remarks here. But generally speaking, that's right. 3%-5% increase in expenses year-over-year is what we've done historically, and we would anticipate to kind of remain in that range here in 2027. Certainly, there will be additional hires to continue to grow, but there's also some potential expense offsets and a lot of that is still kind of we're in the final stages of baking that all together and running that through for one final look before we're prepared to provide that expense guidance more directly here, probably in the first quarter.
Yeah. Understood. I know we're a little early for that, so I appreciate your thoughts. Secondly, on credit. I think you said the criticized and classifieds were down a good amount in the third quarter. The non-performers were up a bit. One of them is held for sale, looks like. Can you just talk about the dynamics of how you expect that one held for sale loan to play out that's going to be sold next quarter and any kind of expectations on losses? Is there any kind of change in how you're thinking about just the overall credit profile from here?
Yeah. The one held for sale is one of the three credits from Premier. We expect that to be resolved. We do not expect any loss on that. Just to give you a quick update on those three. We're once again anticipating at least two of the three, if not all of them, will be resolved this quarter. Obviously, that wouldn't be a big movement for the NPLs. Nothing has changed since last quarter. Two of them are very well collateralized. The other one we feel very good about. I don't see any sort of meaningful write-off on any of the three.
Once again, very well collateralized. The slight uptick was mainly related to one property we have, which we've had a very heavy reserve on for over a year. That one, I don't think will get resolved in the fourth quarter, but we would expect it to be resolved in probably first quarter next year. But once again, we already have a really heavy reserve on it. Once again, feel very good about credit. Obviously, the C&C is going down significantly. Feel like we're trending in the right way. Hopefully by the end of the quarter, we get a few of these credits off our books and back into a better range for NPAs.
Thanks, Jeff. I guess the way to think about it from a net charge-offs perspective is this was a little bit elevated from a quarter, just looking back over the last several quarters. It's not high, but it's higher than what you've had. You would expect that number to come down to something more similar to what you've been doing over the last several quarters?
Yeah, absolutely. As it relates to the charge-off we had this quarter, it was related to an indirect auto dealership that we had fully reserved. It was really just a one credit. I would expect next quarter to be back to where we were before with almost basically no charge-offs. That is how we see it going forward.
Got it. Lastly, also on credit, the reserves have been bouncing around a little bit, but drifting down here, approaching 1% now. Sounds like you have some specific reserves still left in there. Just curious how you see that trending, Dan, from this point before we see that stabilize.
Yeah, I would say that calculation moves around a little bit from quarter- to- quarter and certainly is dependent upon specific reserves. In this quarter, for example, we saw that coverage ratio drop by about 4 basis points from 112 basis points- 108 basis points. I would say a good portion of that was somewhat related to that charge-off, i.e., we had it fully reserved for and charged it off. That reserve came out of the calculation, out of the reserve. That was probably one of the biggest drivers. I would also say criticized and classified loans has also been a pretty big driver. It is probably the single largest qualitative factor we have in our CECL reserve.
Those were down $95 million, 55 basis points kind of quarter-over-quarter. That also helped. We historically have had an office qualitative factor that would have certainly been in place at the end of last year, and that has also kind of rolled off to zero at this point as well. Those are the kind of the movement in the qualitative factors. I think unemployment has been relatively steady. That is kind of 108 basis points, I do not see it getting much lower than that. We have been hovering around 110 basis points allowance coverage ratio really probably for the last eight plus quarters, ±4 basis points or 5 basis points.
That's great color, Dan. Appreciate that. That's all I had, guys.
Again, if you have a question, please press star then one. Our last question comes from David Bishop with Hovde Group. Please go ahead.
Hey, good afternoon, gentlemen.
Hey, how you doing?
Hey, Dave.
Good. Hey, Jeff, quick question. In terms of the newer markets, especially Florida, just curious, loan pricing there, any differential in terms of loan pricing versus compared to maybe some of your legacy markets and other markets?
No, we have not seen any difference at all. I would tell you that that market actually is doing a really great job, probably better than average on getting loan fees. They charge fees and we are able to get fees. The market tends to lend itself to fees in Florida, and they have done a great job on that.
Got it. Then a follow-up question on the deposit side. I am curious if you are tweaking anything on the compensation plan side to sort of reward or drive greater sort of core operating account growth this year. Thanks.
Absolutely. That is a great question. We have been talking about that, and we are going to tweak our incentive plans to not only incent deposits a lot more, we are also going to, for everyone, break out non-interest bearing and interest bearing. There is going to be a heavy focus on deposits going forward, and especially next year. We have already had meetings with our regional presidents and our markets, and so they are all aware of it as well and really getting on our front foot when it looks at getting deposits. I think you will see some great progress in fourth quarter, would be my expectation, and then all of next year. It will be heavily incented to bring in more deposits.
Appreciate the color.
Thank you.
This concludes our question- and- answer session. I would like to turn the conference back over to Jeff Jackson for any closing remarks.
Thank you. To summarize, our year-to-date financial results demonstrate the strength of our growth strategy and our relationship-focused banking model as we deliver solid return ratios and earnings per share growth for our shareholders. Our success continues to be driven by talented people, strong customer relationships, and a commitment to disciplined growth.
With strong momentum across our franchise and a robust commercial pipeline, we believe we are well-positioned to build on that performance in the quarters ahead. Thank you for joining us today. We appreciate your continued interest in WesBanco and look forward to speaking to you at one of our upcoming investor events. Have a great week.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.