John Iannone - VP, IR Todd Clossin - President & CEO Bob Young - EVP & CFO.

Bob Ramsey - FBR Catherine Mealor - KBW John Moran - Macquarie William Wallace - Raymond James.

Good afternoon, and welcome to the WesBanco Inc.’s First Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to John Iannone, Vice President of Investor Relations. Please go ahead sir..

Thank you, Denise. Good afternoon, and welcome to the WesBanco Inc’s first quarter 2016 earnings conference call. Our first quarter 2016 earnings release which contains reconciliations of non-GAAP financial measures was issued this morning is available on our Web site, www.wesbanco.com.

Leading the call today are Todd Clossin, President and Chief Executive Officer and Bob Young, Executive Vice President and Chief Financial Officer. Following the opening remarks, we will begin a question-and-answer session. An archive of this call will be available on our Web site for one year.

Forward-looking statements in this report relating to WesBanco’s plans, strategies, objectives, expectations, intentions and adequacy of resources are made pursuant to 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, 2015, as well as documents subsequently filed by WesBanco with the Securities and Exchange Commission which are available on the SEC and WesBanco Web sites.

Investors are cautioned that forward-looking statements, which are not historical facts involve risks and uncertainties, including those detailed in WesBanco’s most recent Annual Report on Form 10-K filed with 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. WesBanco does not assume any duty to update forward-looking statements.

Todd?.

Thank you, John. Good afternoon, and welcome to WesBanco’s 2016 first quarter earnings call. As many of you know WesBanco is a diversified and well-balance financial services institution with the community bank at its core, it’s built upon a strong legacy of credit and risk management.

We have meaningful market share across our key geographies maintained by exceptional customer service, solid and growing fee-based businesses led by our proprietary mutual fund family, the WesMark Funds and our century old trust business. On today’s call, we’ll cover several operational topics and review our financial results for the first quarter.

Before we begin, there are several key takeaways this afternoon. With the one year anniversary of our merger with ESB Financial, we have successfully integrated our organizations. We continue to experience a robust pipeline and generate strong loan growth across our markets, while credit quality also continues to improve.

And we are maintaining our focus on discretionary cost control in order to drive positive operating leverage. We are pleased about our results for the quarter, which are in line with our expectations as we continue to make progress on our goals.

For the first quarter of 2016, we earned fully diluted earnings per share of $0.60 on net of 23 million, which increased 13% from the prior year quarter, after excluding merger-related expenses.

The successful integration of ESB is evident to the continued year-over-year improvement in our return on average assets, and average tangible equity, which improved to 1.08% and 14.4% respectively, as well as in lower non-performing loan balances and ratios.

In addition, our non-interest expense declined 1.5 million from the fourth quarter of 2015 as we continue to maintain tight discretionary expense control.

As I mentioned last quarter, our long-term growth is focused on five key strategies growing our loan portfolio with an emphasis on commercial and industrial lending, increasing fee income overtime, traditional retail banking services efficiencies and growth, expense management and franchise expansion.

Regarding our lending strategy as of March 31st of this year, our credit quality ratios are excellent and our loan pipeline remains robust. We continue to anticipate mid single-digit overall loan growth tempered by quarterly fluctuations to our construction loan portfolio.

Despite the fact that the first quarter is typically impacted by seasonal issues, we achieved total loan growth of 5.4% compared to the first quarter of 2015 and 5.6 million annualized, when compared to December 31st. Our first quarter’s loan growth was achieved through more than $450 million in loan originations.

Nearly half of the year-over-year growth was from home equity and commercial and industrial loans, which are being driven by increased business activity, focused calling efforts and the commercial lending hires we’ve made over the past year and a half.

In this lower for longer interest rate environment that we expect, our focus on expense management remains critical. We look at expense management twofold, controlling discretionary expenditures and ensuring investments we make contribute positive operating leverage over a reasonable period of time.

A perfect example of such an investment is the hiring of additional C&I lenders in our largest urban locations over the past 18 months. Over the past 12 months these new lenders have produced approximately $140 million of new C&I loan volume.

In fact their dedication to delivering positive operating leverage coupled with our attention on expenses is evidenced in our results and allowed us to improve -- continue to improve our efficiency ratio to 55.5% during the quarter.

As I mention the ESB merger has now been fully integrated and we’re benefiting from our top-10 market share in the Pittsburg MSA. The strength of our legacy markets coupled with the earnings diversification our newer markets provide is allowing us to show consistent and profitable growth across our franchise.

We now have approximately one third of our organization represented within each of our three states of operation, West Virginia, Ohio, and Pennsylvania. Before turning the call over to Bob I would like to provide a brief update on the shale, oil and gas environment within which we operate.

As I mentioned on last quarter’s call, while reduced prices have led to a slowdown in new well drilling investments continue to be made in the region by large energy companies as they see the proven leases as a long-term investment opportunity. Existing well leases continue to renew and pay royalties to landowners.

Pipeline infrastructure, construction is anticipated to remain a positive for 2016. Our local economies remains stable as they never experienced a boom environment from the previous influx of temporary workers drilling wells. Furthermore, we’ve seen only limited impact on our customers related to the low oil and gas prices.

In general our efforts with shale are centered on deposit in wealth management growth as deposits from Marcellus and Utica shale customers have remained relatively stable over the past year. There has been no material change in our exposure to oil, gas, coal industry or the credit quality of that exposure.

As of March 31, 201 less than 1% of our total loan portfolio was directly related to oil, gas and coal industry and an additional approximate 2% of our total loan portfolio was indirectly related to ancillary businesses supporting the industry.

Our unused committed loan facilities for the industry actually dropped by $17.5 million during the quarter as we exited our performing credit. I would now like to turn the call over to Bob Young our Chief Financial Officer for an update on our first quarter financial results.

Bob?.

Thank you, Todd. We’re certainly pleased with our start to 2016, we are diligently watching expenses as we make progress on our goals and we’re excited about our opportunities to continue to execute upon our long-term growth strategies.

For the three months ended March 31, 2016 we reported net income of $22.87 million and earnings per diluted share of 60. Excluding merger-related expenses from the prior year period as detailed in our earnings release net income would have increased 13.2%.

For the first quarter return on average remain strong at 108 versus 109 a core basis for the first quarter last year, while return on average tangible equity of 14.4% was down slightly from last year’s core figure of 15.3%.

GAAP results of 75 basis points and 10.6% respectively for last year’s first quarter were impacted by the ESB Financial acquisition, both ROA and ROTCE were comparable with the fourth quarter of 2015 with return on tangible common equity down slightly due to a higher tangible equity ratios from retained earnings and a lower loss from the accumulated other comprehensive income due to a more positive mark-to-market on available for sale securities and the year-end pension plan benefit adjustments.

As a reminder our earnings release published this morning contains our consolidated financial highlights and reconciliations of various non-GAAP financial measures.

Net interest income grew 4.9 million or 8.9% to 59.8 million in the first quarter when compared to the prior year’s quarter as average earning assets increased 18.7% led by a 13.1% increase in average loan balances.

Total portfolio loans of 5.1 billion as of March 31, increased 5.4% year-over-year reflecting an $86 million increase in loan originations or 23.5% over the first quarter of 2015.

Total loan growth was driven by growth in commercial real estate, home equity and commercial industrial loan categories with the latter two benefiting from our strategic growth efforts and improved loan origination processes.

Total deposits decreased $0.3 billion to $6.1 billion at March 31, due to reductions in certificates of deposit from lower rate offerings for maturing CDs, continued run off of higher cost retail CDs, mostly from ESB and customer preferences for demand and savings deposit products.

When excluding the impact of CDs total deposits actually increased $56.7 million to $4.6 billion reflecting our retail strategy to emphasize customers with multiple relationships, as well as the monthly inflows driven by shale gas royalties and lease payments.

We continue to believe this provides significant opportunity for our financial centers to cross-sell our wealth management services. Which as Todd mentioned is evident in the growth of our private banking services.

For the first quarter of 2016, the net interest margin was 3.29% down 30 basis points year-over-year, primarily reflecting a higher percentage of investments to total earning assets and the associated lower yields on the retained securities portfolio from the ESB acquisition.

Also impacting first quarter net interest margin was the influence of the low interest rate environment on the re-pricing of existing loans at lower spread and competitive pricing pressures on new loans. Lower loan spreads are due to the continued low interest rate environment and a relatively flat yield curve.

Compared to the fourth quarter of 2015, our net interest margin decreased slightly due to increased funding cost associated with a high proportion of Federal Home Loan Bank’s medium term borrowings and higher junior subordinated debt costs.

Federal Home Loan Bank borrowings of $1 billion represented 17.2% of interest bearing liabilities during the first quarter of 2016. These borrowings were increased 607 million year-over-year to offset the anticipated run off of higher rate certificates of deposit and to partially upfront loan and securities growth.

Extension of reports from these borrowings to medium terms of one to three years hustling the fourth quarter also caused the cost to increase somewhat in order to improve assets sensitivity in an eventual rising rate environment. For the first quarter noninterest income increased 6.6% from the prior year to 19.4 million.

The $1.2 million increase was driven by net security gains of 1.1 million, which resulted from calls on agency securities. While trust fees were negatively impacted year-over-year due to market declines and a state fee volatility. Deposit service charges and E-banking fees increased year-over-year from increased retail and business transactions.

Some of which related to ESB’s customers the adjustments to our fee schedules and from our retail banking strategy to focus on transitioning our personnel from transaction-based to sales-based activities by actively encouraging cross-selling.

Our company-wide dedication to expense management remains one of the keys to our success, which is evident to our delivering positive operating leverage both year-over-year and sequentially during the first quarter.

This positive operating leverage is also apparent through continued improvement in our efficiency ratio of 55.52%, which represents a decrease of 272 and 82 basis points compared to the first and fourth quarters respectively for last year.

Non-interest expenses for the first quarter increased 3.7% year-over-year to 45.3 million, when excluding restructuring and merger-related cost, primarily driven by the larger branch network associated with ESB merger.

Encouragingly non-interest expenses declined 1.5 million from the fourth quarter of 2015, reflecting strong discretionary cost controls, lower incentive compensation, lower operational losses and OREO expenses and seasonally lower marketing expenses. A mild winter also contributed to lower seasonal maintenance expenses.

Turning now to asset quality and our regulatory capital ratio metrics, for the three months ended March 31, 2016 our net charge offs of 1.5 million represented a ratio to average loans of just 0.12% an improvement versus both the prior year and sequential quarterly periods.

The provision for credit losses was 2.3 million for the quarter primarily reflecting loan growth. Nonperforming loans and nonperforming assets, which had increased somewhat because of the ESB acquisition, have continued to decline in both absolute dollars and as percentages of total loans.

NPLs to total loans were 85 basis points and NVAs to total assets were just 57 basis points at the end of the period.

At quarter end our capital ratios remained well above the well-capitalized standards required by bank regulators, as well as Basel III with our tier 1 leverage capital ratio at 9.46%, tier 1 risk based capital of 13.3%, total risk based capital of 14.06% and common equity tier 1 capital of 11.58%.

Lastly our intangible equity intangible assets ratio improved to 8.15% as compared to 7.78% at the end of the first quarter last year and 7.95% at the end of the year. Before opening the call for your question, I would like to provide an update on our thoughts regarding 2016.

We continue to anticipate a lower for longer interest rate environment with a relatively flat yield curve and that will continue to impact our net interest margin. We are currently modeling for two rate increases in 2016 one each in the third and fourth quarters.

We still anticipate mid single-digit overall loan growth which we plan to fund with normal securities portfolio runoff and if necessary short-term borrowings.

Lastly reflecting several recent new hires in conjunction with our $10 billion asset threshold preparations and continued discretionary cost control, we anticipate expenses during the second quarter of 2016 that should be relatively consistent with the expense run rate in the fourth quarter of 2015.

With our focus on delivering positive operating leverage, we currently anticipate costs in the second half of 2016 will remain well-controlled, but be up slightly for typical midyear salary increases and higher marketing costs associated with our retail deposit and consumer loan growth strategies. We're now ready to answer your questions.

Operator, can you please begin the instructions..

Absolutely, we'll now begin the question-and-answer session. [Operator Instructions] Our first question will come from Bob Ramsey of FBR. Please go ahead..

Bob maybe you could just expand a little bit on that expense guidance, if I understand you correctly second quarter looked like four so to be maybe 1.5 million higher than this quarter and then you said in the back half of the year that you've got additional salary increases and higher advertising and so it will be at a higher level than in the second quarter?.

Yes, that's correct Bob.

We would have a normal 3% salary increase in the middle of the year we do ours middle of the year as opposed to start of the year some organizations do, so we would guide to a higher run rate in the third and fourth quarters than the first quarter two quarters, you've got the second quarter right so you can add 1 million to 1.5 million in the back half of the year per quarter.

For those salary increases I would tell you that we're very much focused on efficiency, we have costing issues in place here at the start of the year too as a result of the lower for longer interest rate environment and we will continue to focus on potential cost reductions in the back half of the year on the cost side..

Okay.

And then this quarter I thought your expenses looked really good particularly given some of the seasonal trends vis-à-vis the salary increases midyear you've got payroll taxes and things, just kind of curious what is it that is moving higher from the first quarter to the second where you're seeing the increase from now until the next quarter?.

Well we do anticipate that seasonally lower healthcare expenses, people have a tendency to be lower in the early part of the year because of the need to satisfy deductibles, so we anticipate higher healthcare-related expenses effecting employee benefits throughout the rest of the year.

You have some summer occupancy expenses and normally those are less than our winter seasonal maintenance expenses, but that may not be true as we had as I said earlier a pretty mild winter affecting the occupancy line. I mentioned seasonal marketing it was lower in the first quarter than we planned.

If you take a look at the run rate for marketing last year and just kind of piggy that up over the last three quarters minus the first quarter that should give you some guidance on that particular line.

And then other than that I would tell you that in the first quarter we saw a seasonally lower OROE expenses and as compared to the fourth quarter lower other operational losses, we did have some minor operational losses and like many organizations an ATM skimming incident, so those kinds of things impacted the fourth quarter along with your normal year-end accrual type expenses and a true up on incentive compensation.

So that's the guidance that I provided at a detailed level in the back half of the year in addition to the 3% salary increase..

Okay.

And then sort of thinking about your commentary around margin, you did sort of indicated there will be a little bit of pressure on rates in quarters where there is no a little pressure on margin in quarters where there is no a rate increase, how should we think about the level of pressure without any sort of rate increase?.

I think what we experienced in the first quarter which was 3 basis points lower than the fourth quarter and there is a basis point lower in the first quarter related to accretable yield so I’d point that is not a big deal, but we do anticipate this year only 5 to 6 basis points of accretable yield.

Last year it was 8 to 10 depending upon which quarter you were looking at. It was 7 here in the first quarter so it will continue to come down and that would have a basis point or two of impact on the core margin.

The lower for longer should there be no increases which we have baked in one in early third quarter, one early to mid fourth quarter that would probably have another three to five basis point worth of margin impact.

If we were not to get that, we would expect and hope that our loan growth would mostly offset that but -- and I guess what I would say is that the anticipation is for a relatively flat margin from a year including the two back half increases and a slightly lower margin without those back half increases..

And the next question will come from Catherine Mealor of KBW. Please go ahead..

Maybe just one follow-up on the margin, in terms of mix shift we have seen CDs coming down and FHLB borrowing coming up over the past couple of quarters, how should we think about that mix shift going forward? Do you think you will see FHLB balances growing from here or is that strategy kind in place for now?.

Yes, we did make some shifts primarily in the fourth quarter and extended a significant portion well over $300 million into the one to three year bucket. And some of that will mature this year and probably given the lower for longer interest rate environment that we are now anticipating.

We will probably stay short with the portion of that that matures this year, so at this time I do not anticipate it will be extending, Federal Home Loan Bank’s advances for longer. And I also don’t anticipate it will be taken down significantly more of those.

Last year recall -- we didn’t have a lot of the time in the ESB acquisition, we inherited that quite a bit with the acquisition because of their investment portfolio.

And then there was some CD run off in the back half of the year that we did fund with Federal Home Loan Banks, as opposed to trying to adjust the entire CD pricing strategy for the organization.

So, I guess some substance we are not anticipating further growth in Federal Home Loan Bank advances and probably we will play a few down here as they mature..

And then on the securities side, I know you are working to make loans a greater percentage of average earnings assets and to move securities down overtime, what level do you think you would aim for securities to be as a percentage of average running asset by yearend? Thanks..

We typically at present put a timeline on it because that’s going to be dependent upon loan volume obviously as well.

But we have historically run around mid-20s as a percentage of the total balance sheet and securities and we would like to get back to that level and it may take few quarters it may take longer than that based upon whatever we have to see in loan volume growth, but that would be the plan fiscal and would be mid 20s..

And the guidance we provided on that earlier was that to the extent that you want to factor in a mid single-digit loan growth number we have said we would fund that about 50% with maturing investments, so sort of a $2 of growth, $1 of shrinkage on the investment portfolio side where the other funding coming from either deposits or borrowings, Catherine..

[Operator Instructions] Our next question will come from John Moran of Macquarie. Please go ahead..

I think the first one just on the trust and the brokerage lines obviously got a little bit this quarter and I think you alluded to in your prepared remarks, as the volatility that was going on.

I know that 1Q is usually the higher watermark just from a seasonal perspective on the tax prep stuff it is -- are you guys seeing kind of signs of life here as markets have behaved a lot better kind of post mid-February?.

Yes, the trust tax fees as you mentioned in the first quarter the first quarter phenomenon the early part of the quarter January and a good chunk of February was pretty tough from a market perspective with the market dropping, and obviously our fees as a percentage of that have rebounded nicely towards the end of the quarter and has continued to be strong into the second quarter.

So we would expect that to be more normalized to where it was in the past..

And as I mentioned in my prepared remarks, John as there was some volatility in regards state fees in the first quarter as compared to the first quarter of last year lower state fees this quarter..

And then the other one that I had was just, it was a good origination quarter for you guys despite sort of seasonal, what is ordinarily seasonally pretty slow, just wondering if you had the split on what came out of the -- I know you -- I think you mentioned 140 from the new lenders in total over the last 12 months.

But for the quarter if a lot of it came out of the kind of more urban, newer, hires and then any strategic plans around putting in additional folks in any of the markets?.

Yes it really came from both, as it came from our urban markets as well as call it our smaller and mid-sized markets we saw a robust pipeline in all of those areas.

We -- as I have said in prior calls, we were building the C&I team was largely completed, we’ll add a couple of people here or there and we’re continuing to do that, and I would expect that to happen this year, but the majority of the expense to build the team needed to generate the C&I growth at a double-digit rate well into the future it is pretty well intact our major hires have been done.

Our senior lenders in our key markets are on-board, and have been on-board for several quarters now and producing very well, and many are building their teams but to a large extent that has already been completed..

And the next question will come from William Wallace of Raymond James. Please go ahead..

First question just real quick on the tax rate, I know there was kind of a big jump off in the first quarter.

Was there something one-time in there or is that what we should anticipate for the year?.

Well keep in mind last year, we had $9 million of merger-related expenses in the first quarter, which if you run through your effective tax rate calculation. As we do on an annualized basis as opposed to that all heading in the first quarter of last year produced a 24%-24.5% effective tax rate last year.

Take that out and you’re sitting closer to 28% in the first quarter of this year. So yes that is, I think the 27% to 28% area is the guidance we would provide at this time on that line item John. I am sorry, Will..

No problem, Sam. The margin, Bob you mentioned that I believe you said 3 to 4 basis point benefit should the Fed hike.

Would you expect that 3 to 4 basis point to be the benefit as say every 25 basis point moved by the Fed?.

Well, we are experiencing competitive loan pressures and re-pricing in the portfolio. And it depends upon the mix that you put on, we are very much focused on C&I and home equity, those come with lower raw loan yields than a five year re-pricing commercial real estate loan.

So mix did have an influence in the first quarter as it does in monthly re-pricing of the portfolio. The other big factor that you need to keep in mind is that LIBOR swap rate are tighter by 50 basis points in the first quarter of this year as compared to the third or fourth quarter of last year.

That’s having an impact on the industry not just us, but as our loans reprise off of LIBOR, obviously they get the benefit. Our customers get the benefit of that in the period that re-pricing occurs as well as for newer loans. There is only 100 basis points spread between the 2 and the 10-year for instance.

And as I said, it is a competitive environment for new loan customer so all of that suggests to me as I guided during the call or earlier in the quarter that right around where we are currently including the two increases later this year.

With a little bit of a drop and keeping in mind that we’ve got a couple of basis points of core compression, per quarter related to the accretable yield from ESB. And then if you don’t get the increases, I guess, I would turn that back while it’s 3 or 4 basis points the other way that we would lose if we didn’t have that..

Okay..

And some of that can be made up with some additional actions in the cost of fund side. But for the industry and for us, those are relatively limited..

And then last question is. As you guys think about continued growth and approaching that 10 billion asset threshold.

Do you anticipate that there would be any kind of acceleration of investments on the systems or personnel side to prepare for that from what you’re already doing, that we might see in the 2017 and beyond?.

We’ve been gradually building that in really over the last several years. I mean kind of part of the culture of the bank has always be a little bit ahead of where you need to be from a regulatory and a compliance standpoint and I would tell you we continue that.

So we’ve always been prepared to be a little bigger than we actually are and we have continued that trend, we do have regular meetings to kind of plan out, what we need to invest in people-wise and everything else, and what’s top of my mind is to make sure that I keep the efficiency ratio in mind.

So as we do grow a little bit and build an infrastructure the thought process is to make sure that we’ve got the revenue initiatives hitting on all cylinders to cover that expense and trying to get to the one coverage and a lot of those types of investments.

So yes, I guess the answer to the question, we would see a continued build but I don’t see it as the material number quarter-to-quarter, it is just slow build overtime and we worked very hard to make sure that we’re taking other expenses out of the company to cover that, but also generating the revenue to keep the efficiency ratio in a very strong manner..

And ladies and gentlemen that will conclude our question-and-answer session. I would like to turn the conference back over to Todd Clossin for his closing remarks..

I'd just like to thank everyone for their time today and hopefully we'll get a chance to see on some upcoming investor prep, so have a great day. Thank you..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines..