Todd F. Clossin - President & CEO Robert H. Young - EVP & CFO.

William J. Wallace - Raymond James.

Good morning and welcome to WesBanco's Conference Call. My name is Keith and I will be your conference facilitator today. Today's call will cover WesBanco's discussion results of operations for the quarter ended December 31, 2014. Please be advised, all lines have been placed on mute to prevent any background noise.

After the speaker's remarks there will be a question and answer period. [Operator Instructions].This call is also being recorded. If you object to the recording, please disconnect at this time.

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-K for the year ended December 31, 2013, documents subsequently filed by WesBanco with the Securities and Exchange Commission, including WesBanco's Form 10-Q for the quarters ended December 31, 2014 – sorry 30, 2014, September 30, 2014, respectively, 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 in WesBanco's most recent Annual Report on Form 10-K filed under the SEC under "Risk Factors" in Part I, Item 1A.

Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements, including, without limitation, that the businesses of WesBanco and ESB may not be integrated successfully or such integration may take longer to accomplish than expected.

The expected cost savings and any revenue synergies from the merger of WesBanco and ESB may not be fully realized within the expected timeframes; disruption from the merger of WesBanco and ESB may make it more difficult to maintain relationships with clients, associates, or suppliers; the effects of changing regional and national economic conditions; 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 Board, the Federal Deposit Insurance Corporation, the SEC, the Financial Institution Regulatory Authority, the Municipal Securities Rulemaking Board, the Securities Investors Protection Corporation, and other regulatory bodies; potential legislative and federal and state regulatory agencies – 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; internet hacking; 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 any forward-looking statements. WesBanco’s fourth quarter 2014 earnings release was issued yesterday, and is available at www.wesbanco.com. This call will include about 25 to 30 minutes of prepared commentary followed by a question-and-answer period which I will facilitate.

An archived webcast of this call will be available at wesbanco.com. WesBanco’s participants in today’s call will be Todd Clossin, President and Chief Financial [ph] Officer and Robert H Young, Executive Vice President and Chief Financial Officer and both are available for questions following opening statements. Mr.

Clossin, you may begin your conference..

Great. Thank you, Keith. We had [indiscernible] this morning. I hope you all is fortunate. So good morning, I want to thank you for participating in WesBanco's Fourth Quarter 2014 Earnings Call. We're pleased you've joined us this morning to hear about our strong operating results.

I'll be making some opening comments, Bob Young, our CFO will provide some financial highlights and I will moderate the question-and-answer period. A press release detailing the results for the fourth quarter and the full year was issued last evening. A copy of the entire press release is available on the website.

We will assume all participants are familiar with WesBanco and we can begin our discussion of the financial results. WesBanco had an excellent year and fourth quarter. Our earnings reached a record $70 million for the year, as compared to $63.9 million for 2013. This represents a double-digit earnings increase of 10%.

For the quarter, we generated $16.5 million earnings as compared to $15.4 million during the fourth quarter of last year. This represents an 8% earnings increase. Our return on average assets was 1.12% for the year, as opposed – as compared to 1.05% for the full year of 2013.

We delivered earnings per share of $2.39 for the year, which represents an increase of $0.21 per share or 10% earnings per share growth as compared to 2013.

Our increased earnings are being driven by solid loan growth, solid deposit growth, excluding CDs, and expanding that interest margin, disciplined expense management and continued improvement in credit quality. Our net interest income has now increased during each of the past six quarters.

I saw some [ph] great deal about generating positive operating leverage within our company. As you can see from our 2014 results, net interest income and non-interest income were up at combined total of $7 million, while non-interest expense was up just $635,000 or 0.4%.

We made investments throughout the year to support our growth, but we also looked for efficient ways to reduce expenses. I am proud of the team for always looking at ways to improve efficiency. A good example is that we're able to reduce our telecommunication expense by 66% year-over-year by more effectively utilizing technology.

We've shown solid growth in assets over the past 12 months and the fourth loan growth accelerating to an annualized growth rate of 5.4%, actual loan growth was 4.9% for the year and 1.4% over the prior quarter. Loan originations were $1.4 billion for the year.

Our loan mix strategy is been to drive a higher percentage growth rate within our C&I and home equity portfolios to better balance the mix between all of our loan categories. During 2014 we made a solid move in that direction. During the year, we generated mid teen percentage growth rates in both the C&I and home equity portfolios.

C&Is outstandings now represent 15.6% of the overall portfolio, up from 14.3% at the start of the year. Home equity loan outstandings now represent 8.1% on the portfolio, as compared to 7.3% at the start of the year.

Our commercial real estate construction portfolios continue to perform well and we've been successfully replacing loans refinanced into the permanent market with new construction production. Deposits, excluding CDs have increased to $192.8 million or 5.4% over the past year with all deposit categories, excluding CDs increasing.

Lower cost core deposits continue to flow into the bank resulting from our marketing and calling efforts. We continue to see meaningful deposit growth from our Marcellus and Utica shale initiatives with eight figure average monthly deposit growth coming in from shale related initiatives.

We continue to take advantage of the balance sheet liquidity, the shale related deposits are providing and we continue to use those deposits to reduce our higher rate borrowings. Net interest income increased 3.7% for the quarter, as compared to the same quarter last year.

That growth came from both an increase in loan balances and an improved net interest margin. During 2014, we reduced our securities portfolio by 1.4% and used those proceeds to fund higher margin loans.

As I already mentioned, expenses continue to be very well managed, part of our culture is to look for ways to improve productivity within our organization. We have in the past, we will continue in the future to spend resources on new talent, new technology and new products to improve our company.

Over the past several months you've seen us to be one of the first banks in the country to announce a partnership with Apple, offering their Apple Pay product. We have also recently installed instant issue debit card machines in our branches.

These machines allow us to improve the customer experience by issuing new cards onsite in each of our branches. Delivering a high quality customer experience across all of our channels is the focus of our ours. We're also creating an innovation team that will keep abreast of new products and monitor what other financial service providers are doing.

We're not cutting our expense by doing this, we're going to take existing team members and redeploy them into this group. Credit quality continues to improve. Charge-offs stood at just 0.23% of average portfolio loans for the quarter and 0.23% year-to-date with both criticized and classified loans continuing to decrease.

Over the past 12 months, criticized and classified loans have decreased by more than 40% and now represents less than 2% of total loans. Our progress with ESB acquisition is on track. We expect to close the transaction during the first quarter of the year.

I recently visited each of the 23 branches and I am pleased with the team and the quality of company that they have. This merger will position us a top 10 full service provider in the Western Pennsylvania marketplace. We look forward to this business combination and all of the synergies it presents.

I would now like Bob Young, our CFO, to discuss with you in more detail the financial results of the quarter, Bob?.

Good morning, everybody. Thank you, Todd. As Todd mentioned, our per share earnings were up about 8% over the fourth quarter of last year and 10% year-to-date.

He also noted our return on average assets improvement from 1.05% in 2013 to 1.12% this year and I would also highlight that we have a industry leading return on average tangible common equity at 15.4%. The ROAA and the ROATCE are both well above available third quarter peer averages of 1.06% and 12.2% respectively.

Our peer efficiency ratio was some 62.5% for the third quarter and ours were under 60 at 59.1% on a core basis. Pretax, pre-provision return on average assets also increased this year from 1.67% to 1.74%. We'll turn now to some of the details in the income statement, the balance sheet.

Net interest income grew 3.7% in the fourth quarter and 4.2% for the year. Factors influencing the growth include approximately 3.1% higher average earning assets for the year, led by 4.8% growth in average loans and lower interest expense with our total annual cost of funds dropping from 73 basis points to 52.

Cost of interest bearing deposits were just 42 basis points for the year and actually they dropped below 40 basis points for the last quarter.

CDs continue to reprice downward ending the year at 89 basis points, due to continued run off of this account type as compared to other cheaper transaction account types, where CDs now only 26% of total deposits compared to 30% last year. That improvement contributed to a better funding mix overall.

The net interest margin also grew 3 basis points from last years 3.58%to 3.61%. This improvement contrast with much of an aging [ph] industry, which reported continued NIM compression this quarter.

On a core basis, excluding acquisition related purchase accounting adjustments, our net interest margin grew 8 basis points year-over-year, a 21 basis point decrease in interest bearing liability cost more than offset a 16 basis point drop in earning asset yields.

Portfolio loans increased some $192 million for the year, as originations of $1.4 billion were very strong and outpaced pay downs despite a relatively slow first quarter of 2014 due to weather related business slow downs. Loan growth was driven by increased business activity in our markets.

Additional lending personnel and particularly the larger urban markets focused marketing efforts and continued improvement in our loan origination processes. In addition, we achieved our goals of increasing both C&I and home equity lending in both dollars and as a percentage of total loans.

C&I loans increased 14.8% due to focused business development efforts, more lenders and an increase in customer line usage. Residential real estate loans increased 4.3%, as mortgage originations improved in the fourth quarter over both last year and earlier periods in 2014.

Home equity lines of credit increased 15.9% due to new loan campaigns and a restructured more competitive product offering. Average interest-bearing deposits were up just 0.2% for the year, while average non-interest bearing demand deposits increased $123 million or 13.6% from 2013.

Average certificate of deposits decreased by 11.8% and we're the only deposit category decrease for the year, as WesBanco continues to focus on reducing way offerings and growing customers with multiple banking relationships as opposed to single service certificates of deposit customers.

Total average borrowings decreased 11.1% from last year end, included in the decrease were certain higher rate repurchase agreements totaling $22 million that reelected to prepay in the third quarter.

Certain short term federal home loan bank borrowings were used to balance funding needs in the fourth quarter, as loan outstandings grew replacing planned at CD runoff. Turning now to non-interest income. For the year, non-interest income decreased 800,000 or 1.1%. It was down about 2.3% for the quarter.

As I just mentioned, the third quarter include a $1.4 million charge related to the prepayment of a $22 million repurchase agreement, if you exclude the impact of that charge, non-interest income for the year would have grown about 1%.

This increase was primarily from higher trust fees on a higher managed asset base and higher securities brokerage and electronic banking revenue, while service charges on deposits and gains on sale of mortgage loans decreased.

For the fourth quarter, higher trust fees and gains on assets disposals were offset by lower deposit service charges, other banking and non-banking fees and securities brokerage revenues. Turning to expenses. Total expenses were only up 0.4% at $161.6 million, reflecting strong cost controls and the post Fidelity acquisition promised cost savings.

These totals are for the year. Merger related expenses of $1.3 million were incurred in both year's, so they didn’t affect core versus GAAP results for expenses in total. Non-interest expenses were up 3% for the quarter from last year at $42 million.

However, if you remove merger related expenses, the $1.3 million I just mentioned from the quarter total, it would have resulted overall in flat core expenses year-over-year.

In addition, excluding two customer fraud related charges of 550,000 addressed in the quarter in other operating expenses, fourth quarter expenses were actually have been down from last year by 1.4%. The details of expenses, salaries and wages decreased 3.7% from the fourth quarter of last year and were up only 3% for the year.

The quarters comparison was impacted by lower accruals for incentive and stock related compensation, lower brokerage commissions on higher deferred loan costs, while the annual increase was for a routine salary adjustments, higher brokerage commissions, higher incentive and stock-related compensation and lower deferred loan costs, somewhat limited by a lower overall number of employees down some 1.4% from last year end.

Employee benefit expenses decreased 9.4% for the quarter and 7.5% for the year, primarily as a result of decreased pension expense and deferred compensation, partially offset by higher healthcare cost.

The trend on pension expense will reverse in 2015, as it would be higher due to a lower year end discount rate when we measure the liability and changes to more mortality assumptions affecting the industry in general both of which affected total projected benefit obligation.

Combined net occupancy and equipment expense increased 4.1% for the quarter and 5.3% for the year, due to increased depreciation and other equipment related expenses, resulting form the opening of three new branches over the last 5 quarters, as well as significant upgrades to our data processing and communications infrastructure.

Lower FDIC insurance and intangibles amortization limited overall expense growth.

Other operating expenses were higher for the quarter due to the aforementioned fraud expenses were lower for the year, as lower foreclosure related costs and telecommunications expense offset increased fraud and other operations losses and higher miscellaneous and franchise related taxes.

Marketing expenses were higher for the quarter reflecting campaign timing, but flat overall for the year.

Turning now to credit quality, net charge offs for the fourth quarter and for the year were $2.3 million or 23 basis points and $9.3 million or 23 basis points of average portfolio loans respectively, compared to $2.9 million or 30 basis points for the fourth quarter of 2013 and $14.2 million or 38 basis points for all of 2013.

Non-performing loans and assets were relatively flat from last year end in dollars, but were lower in percentage at 1.25% for NPLs compared to last years 132% and 137 versus 145 for the non-performing asset ratio.

Criticized and classified loans decreased to 40% or $54 million from last year end, down now to $81 million which as Todd mentioned is now under 2% of total loans. Classified loans declined as the economy continued its improvement.

The allowance for loan losses decreased $2.7 million or 5.7% from December 31, 2013, due to a 40.2% decrease in the quarterly loan loss provision and 29.5% decrease for the year, representing 1.09% of total portfolio loans at year end versus 1.22% at December 31 of 2013.

The decrease in the allowance is supported by lower net charge offs, the criticized and classified loan reductions and 33.2% decrease in overall loan portfolio delinquency. Shareholders equity.

Total shareholder equity improved as of December 31, 2014 to $788 million, up 5.6% from last year end, due to strong retained earnings offset somewhat by lower other comprehensive income.

The Tier 1 leverage ratio was 9.88%% at year end versus 9.27% last year, Tier 1 risk base was 13.76% versus 13.06% and total risk base capital was 14.81% versus 14.19% last year. Tangible equity also improved to 7.88%, up from last years 7.35%.

Total shareholders equity was flat year end as compared to the end of the third quarter due to lower OCI from a higher pension plan projected benefited obligation as I noted previously, which affected equity by about $15 million at the end of the year, partially offset by mark-to-market improvements and the available for shale [ph] investment portfolio.

Our strong and growing equity ratios did permit the Board to increase the quarterly dividend rate some 10% to $0.22 per share last April, representing a 37% of total 2014 earnings and about a 2.75% current yield measured today.

We will continue to look for ways to enhance our returns to shareholders, through dividend increases and share repurchases, organic earnings per share growth and select opportunistic acquisitions.

In summary then, we're pleased overall with our performance for the fourth quarter and all of 2014, including a strong 5% loan growth and higher wealth management income, contributing to improve net revenues that more than offset the minimal expense growth, providing significant operating leverage, a lower efficiency ratio and higher net interest margin for the year will also highlight for us in comparison with the banking industry overall.

Credit quality metrics improved overall, resulting in a lower loan loss provision. These factors have positively influenced core profitability and earnings per share growth and we look forward to our growth prospects in 2015 from improving loan pipelines and our wealth management and retail businesses.

We're also obviously enthused about our Pittsburgh Metropolitan growth opportunities and are looking forward to converting ESBs systems and introducing our products and services to their customers commencing in the second quarter after our expected closing later this quarter.

This now concludes our prepared commentary and we'll open the call for questions. Todd, will moderate the Q&A session and we'll turn the call back now to Keith to moderate the questions. Thank you..

Yes. Thank you. [Operator Instructions] And the first question comes from William Wallace with Raymond James..

Good morning, gentlemen..

Good morning, Wallace..

Organically, what do you expect your loan growth could like in 2015?.

What I could say is, we're very pleased with our pipelines right now. And we finished the fourth quarter as I mentioned in my comments, on an accelerating basis with over 5%. And the pipelines looked to be at a high point at the end of the year.

So probably going into the year, and I would tell you the expect kind of what we had in the past in mid single digit on an overall basis..

And then what about looking at the core margin and the trends you might expect out of that. And then Bob I don’t know if you've had enough time or done enough work yet on the marks.

But maybe what we might be thinking about for scheduled accretion once the ESB acquisition closes?.

I'll start off with the loan margin and then turn the second part over to Bob. We've addressed a couple of things as you know. We mentioned in prior calls, we stayed away from what I'll call compressed spreads on deals and we tend to look at things from a ROE perspective.

So spread be into everything all combined and we passed on a number of transactions. We could have shown several percentage points higher in growth rate and loans. I had been chose to do some pretty high quality loans, just one at the spreads if we wanted. We walked away from them and we sacrificed some loan growth to keep the margin up.

And I think that shows in fact that in an 8 basis points increase in margin and excluding the purchase accounting related to a prior merger. So we feel good about that.

We're also continuing to deliver on the path of taking broad cash flows off our securities portfolio and investing them in higher margin loans as well and that’s just a more efficient way we think to run through authorizations [ph]. So we're not going to change that in 2015.

We do anticipate that it has an impact on loan growth, but the mid single digit number that I mentioned accounts for that. We'll continue to be prudent. We don’t want to just grow the balance sheet for the sake of growing the balance sheet, and not grow the bottom line. We'll continue to stay very disciplined in that area..

I guess what I would say Wall, I am sure others have a similar though process. On the margin for 2015, it’s kind of steady as fee goes. I would – without providing a lot of guidance suggest that our modeling is without ESB showing the core margin to be about where we ended the year at around the 360 mark.

I think in a most likely scenario with the kind of growth that we're talking about its likely to be 2 or 3 basis points higher than that, without if you just did a shock environment without any growth at all and any other changes in the balance sheet, I think you'd continue to see some grippage [ph] if that’s a word in the loan portfolio, as the rest of the industry experiencing.

I would point out that positively we were able to hold the securities book yield for 2014, actually grew 4 basis – or yes, 4 basis points from last year. That we did that without extending duration. We're able to take advantage of the reinvesting of cash flows that Todd mentioned.

So you had – you did have a higher rate environment towards the end of 2013 which benefited us here for much of 2014. And obviously the cost savings on the interest bearing deposit side and restructuring of liabilities in general, both in the borrowing side, as well as the mix of deposits significantly helped us.

So hopefully that’s helpful on the core margin. We had mentioned back in October that with the – with ESBs coming on board that we'd likely see 7 to 10 basis points worth of margin compression.

Overall just blending in their lower margin balance sheet even after mark-to-market, 25% of their assets to our total assets or differently they'd be 25% of our total balance sheet afterwards. Thinking about the amortization accretion, we do monitor the potential for mark-to-market on almost a weekly basis.

I think its fair to say that with the investment portfolio from ESB comprising a larger portion of their overall assets, that given the lower interest rate environment we're currently in and the fact that that portfolio currently has $27 million, $28 million mark-to-market associated with it and 4 to 5 year average life, that today's mark would result a little bit amortization and lower yield on that portfolio than what we had projected back in October.

We do plan on a significant restructuring to that portfolio and we'll adjust assets, so that we don’t have as many high premium securities and some of the longer duration, municipal bonds and other types of securities. So we'll be accomplishing that right around the close date.

We're also going to get rid of most of their borrowings and replace them with different structure. And 1 to 3 year kind of terms, we're going to eliminate their Trup [ph] on the liability side, that will save on $36 million, about 6% a year. So there are lot of plans that we had talked about back in October.

They are still pretty much on track with the exception that the investment portfolio would have a lower ongoing yield than what we had planned.

Is that helpful?.

That is. Bob, thank you very much and thank you also Todd, I'll step out, somebody else can ask you question..

Sure..

Thank you. [Operator Instructions] All right, well there is nothing else at the present time. So I would like to turn the call back over to management for any closing comments..

All right. I want to thank everybody for their time this morning. I appreciate to being with us and wish you all a good rest of the quarter. Thank you for your time..

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Have a nice day..