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

Bob Ramsey - FBR Capital Markets Catherine Mealor - KBW Daniel Cardenas - Raymond James Casey Whitman - Sandler O'Neill.

Good afternoon and welcome to the WesBanco Third Quarter 2016 Earnings Conference Call. All participants will be in a 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..

Thank you, Laura. Good afternoon, and welcome to WesBanco Inc. third quarter 2016 earnings conference call. Our third quarter 2016 earnings release which contains reconciliations of non-GAAP financial measures was issued yesterday afternoon and is available on our website, 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 website 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 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, 2015, and Forms 10-Q for the quarter ended March 31, 2016 and June 30, 2016 as well as documents subsequently filed by WesBanco with the Securities and Exchange Commission which are available on the SEC and WesBanco websites.

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, everyone. On today's call, we'll be reviewing our financial results for the third quarter. Key takeaways from our comments are; we continue to drive positive operating leverage in this extended lower for longer interest rate environment.

We have successfully closed our merger with Your Community Bankshares and look forward to introducing the WesBanco franchise to our newest markets in Northern Kentucky and Southern Indiana, and we're making steady progress on our business and balance sheet remix strategies.

We are pleased about our results for the quarter, which were slightly above our expectations excluding merger related expenses, we earned fully diluted earnings per share of $0.60 on net income of $24 million for the third quarter of 2016, and a $1.79 per share on net income of $69 million for the nine months ended September 30th of 2016.

In addition to our focus on long-term sustainable growth, we're also committed to maintaining a strong financial institution for our shareholders. Our capital ratios and credit metrics continue to be strong, and we’re well positioned for the future. Bob will cover these metrics in more detail in a few minutes.

Our long-term growth is focused on five key strategies; growing our own portfolio with an emphasis on commercial and industrial lending, increasing fee income over time, traditional retail banking services, expenses management and franchise expansion.

As of September 30, 2016, our total loan portfolio grew to $6.2 billion, an increase of 26% as compared to year ago, reflecting $1 billion in loans from the YCB acquisition and approximately 6% organic loan growth.

Organic loan growth was achieved through $1.4 billion in loan origination during the first nine months of 2016, supported by total business loan origination growth of 14%. Roughly half of the year-over-year growth in organic loans was from our strategic focus on commercial and industrial in home equity loans.

These categories grew 14% and 11% respectively, year-over-year. Furthermore, we’ve lowered our exposure to the oil, gas and coal industry and have seen no material change in the credit quality of that exposure.

And as a reminder, in this competitive and extended lower for longer interest rate environment, we continue to be judicious with the loans we book, as you will pass on deals to refill the pricing or the structure, is not reflected about the credit risk.

While the strategy might cost us a few percentage points of loan growths now, it provides significant benefits to the Company and our shareholders over the long term. In addition to our loan growth strategies, we remain focused on positive operating leverage.

Our team is executing well on its strategies, while maintaining tight control over discretionary expenses. Their success is evidence by our continuing to deliver positive operating leverage year-to-date as well as improving our year-to-date efficiency ratio to 56.1%, which is a 118 basis point improvement over the prior year.

As you know, we successfully consummated the merger with YCB and just over four months from the date of announcement. In late August, we received all of the necessary shareholder and regulatory approvals for the merger. On the September, we welcome the customers and employees of YCB into the WesBanco family.

And we look forward to formally unveiling the WesBanco brand in our newest markets, with our branch and data system conversions over the November 4th, weekend. We’re excited about the opportunities that we’re already seeing from our expansion into Indiana and Kentucky.

These high growth markets with great demographics, we're eager to provider our broad array of products and services to our new retail and commercial customers, while continuing to deliver exceptional service to which they are accustomed.

We’re making steady and meaningful progress in our balance sheet strategy, as we’ve mentioned previously, we tend to appropriately remix and manage our balance sheet while still encouraging the loan growth.

While the YCB acquisition was a commercial bank, you may recall that our previous two acquisitions with risk would significantly increase our securities portfolio as a percentage of total assets into low 30% range. We continue to make good progress and reducing the size of this portfolio.

As of September 30th, our securities portfolio decreased approximately 6 percentage point year-over-year to 24% of total assets, while our total portfolio of loans increased to 64% of total assets, as compared to 59% a year ago.

This occurred through a combination of YCB and WesBanco portfolio restructuring and using a portfolio of the securities cash flow to invest in new loans.

We believe that the current size of the securities portfolio still provides us the flexibility to manage our balance sheet in this extended lower for longer interest rate environment while supporting mid single digit loan growth.

Moreover, discontinued remix has the added benefit of helping net interest margin as average loan rates are higher than average security rates. In fact, our net interest margin has shown relative stability over the last few quarters, partially from this remix strategy.

As part of our balance sheet remix and funding strategy, we have allowed certain higher cost certificates of deposit to run off over the past few years as we focused on meeting our customers' preferences for other deposit types.

This has resulted in nice organic growth in both interest bearing and non-interest bearing demand deposits, which now represent 46% of our total deposits, as of September 30th 2016 after the YCB acquisition. I would now like to turn the call over to Bob Young, our Chief Financial Officer, for an update on our third quarter financial results.

Bob?.

Thanks, Todd, and good afternoon to you all. As Todd mentioned on September 9th, we closed the Your Community Bankshares acquisition, which resulted in a partial months financial results from them, as third quarter merger related cost of 9.9 million or 6.4 million after tax equated to $0.16 per share.

For the nine months ended September 30th, we reported net income of 62.4 million and earnings per diluted share of $1.61 net of merger related expense. Excluding these expenses from both periods, net income would have increased 6.7% to 69.3 million with earnings per diluted share up $0.04 to a $1.79.

Year-to-date, the return on average assets was 97 basis points and return on average tangible equity was 12.56%, and these ratios were 1.08% and 13.91% respectively when excluding the impact of merger related costs. For the quarter ended September 30, 2016, we reported net income of 17.4 million and earnings per diluted share of $0.44.

Excluding merger related expenses, net income would have been 23.9 million and earnings per diluted share $0.60 as compared to 22.4 million and $0.58 per share last year. For the third quarter, return on average assets was 79 basis points and return on average tangible equity was 10.02%, again reflecting the impact of the merger related costs.

And when excluding those costs, return on average assets would have been 1.09% and return on average tangible equity would have been 13.60%. Our remaining earnings related comments will focus on the third quarter's results and will exclude the impact of the merger related costs.

As a note, our earnings release published last night contains our consolidated financial highlights and reconciliations of non-GAAP financial measures.

Net interest income for the third quarter increased 2.3% year-over-year to 62.0 million due to a 3.8% increase in average earning assets to 8.7 billion partially offset by a 4 basis point decrease in net interest margin.

The increase in average earning assets was driven by a 10.2% increase in average loan balances, reflecting both the YCB merger and our stated balance sheet remix strategy.

Total portfolio loans of $6.2 billion as of September 30, 2016, increased $1.3 billion or 26% year-over-year, reflecting 1.0 billion in loans from the YCB acquisition and organic loan growth of 5.5%, which was supported by a continuation of strong loan originations year-to-date.

Organic loan growth was driven by growth in commercial real estate, primarily construction of land development, commercial and industrial and home equity loan categories, as the ladder too drove approximately half of the year-over-year growth in total loans.

This reflects our strategic focus on commercial and industrial, as well as home equity loans, as these categories organically grew 14% and 11% respectively year-over-year. Total deposits increased 15.2% to 7.1 billion at September 30th, primarily due to the YCD acquisition.

When excluding the impact of CD, organic deposit growth was 1.4% or 66.3 million, reflecting our deposit remix and funding strategies. Furthermore, organic interest bearing and non-interest bearing demand of positive growth was 8.9% year-over-year.

For the third quarter of 2016, the net interest margin was 3.32%, down 4 basis points year-over-year, primarily reflecting the impact of re-pricing of existing loans of lower spreads, competitive pricing on new loans and the extended low interest rate environment, partially offset by continued loan growth in our balance sheet remix strategy.

As a reminder, our balance sheet strategy is to decrease investments securities balances to fund the loan growth, which overtime will improve asset yields as average loan rates are higher than securities rate.

In addition, our net interest margin also reflects increased funding costs associated with a higher proportion of Federal Home Loan Bank medium-term borrowings and higher junior subordinated debt costs, as there mostly three months LIBOR denominated instruments increasing costs from the December 2015 federal funds increase and more recent increases in the three month LIBOR rate.

Encouragingly, our net interest margin continues to show some stability, as an improved 2 basis points sequentially from the second quarter and also as maintain the range between 3.29% and 2.32% over the last four quarters.

We do anticipate some future improvement in the net interest margin during the fourth quarter from a four quarters impact of purchase account from the YCD acquisition. Federal Home Loan Bank borrowings of $1.0 billion represented 16.4% of average interest bearing liabilities during the third quarter of 2016 as compared to 12.7% a year ago.

This year-over-year increase of $235 million reflects our balance sheet strategy, which included increasing our overall asset sensitivity late in 2015 in anticipation of then a rising rate environment, as well as partially offsetting the runoff of higher rate certificates of deposit as part of our plan funding strategy.

Of note, that these borrowings were 10% lower at the end of third quarter, as compared to the end of June, as we utilize cash flows from the related sale of certain investment securities and focused on the overall size of the balance sheet in order to remain under 10 billion in total assets in the near term.

For the third quarter, non-interest income increased 15.6% from the prior year to 19.6 million. This $2.8 million increase was driven by 1.3 million of commercial customer loan swap fee income, 0.6 million of securities gains from the sale of mortgage backed security and higher trust fees and deposit service charges.

The securities gain is the result of continuing our sales strategy to reduce the percentage of securities to total assets, which had increased in 2015 due to the ESB acquisition, as well as normal portfolio restructuring and as part of our ongoing balance sheet remix and size strategies.

Regarding the loan swap fee income, while we have offered this product for several years customers have become more receptive to the back-to-back fixed rate swap product in the current interest rate environment, and as a result we have seen contraction over the last couple of quarters in this fee income category.

We remain focused on long-term expense management and positive operating leverage. For the year-to-date period, our efficiency ratio improved to 118 basis points excluding merger related costs. And on a year-to-date basis, we delivered operating leverage as revenue growth exceeded expense growth.

In addition, as we begin the conversion next week, we remain committed to our target expense savings from the YCB merger with 75% of those anticipated savings to be phased in during 2017. And we do expect somewhat savings to begin later this quarter as a result of these November systems and branch conversions.

Non-interest expense, excluding merger related costs for the third quarter of 2016, increased 0.9 million year-over-year to 47.7 million and were generally consistent with our expectations. The increase in salaries and wages reflects the integration of the employees from YCB as well as our routine annual compensation adjustments.

This increase was partially mitigated by slightly lower equipment and marketing expenses due to the timing of seasonal marketing campaigns. Turning to our asset quality and regulatory capital ratio metrics, for the three months ended September 30th, the provision for credit losses was 2.2 million, primarily reflecting loan growth.

Non-performing loan, criticized and classified loans and past due loans, all improved as a percentage of total portfolio loans on both the year-over-year and sequential quarter basis; net charge offs as a percentage of average loans were 0.20% for the three months ended and 0.14% for the nine months ended September 30, both of which improved 10 basis points year over year.

We continue to maintain strong regulatory capital ratios as our ratios remain well above the well capitalized standards required by bank regulators and Basel III capital standards with our Tier 1 leverage capital ratio of 9.51%, Tier 1 risk-based capital ratio of 12.95%, total risk-based capital ratio of 13.94% and common equity or CET 1 capital ratio of 11.07%.

Lastly, our tangible equity to tangible assets ratio improved to 8.26%, as compared to 7.8% per stand at the end of the third quarter last year, assisted by both returned earnings as well as higher other comprehensive income.

I would note these ratios were higher than we anticipated at the time of the May merger announcement, as they have benefited from lower tangible book value dilutions from lower merger related expenses, a reduced level of high volatility commercial real estate balances and lower total assets than projected.

In addition, tangible book value was $17.38 versus $16.27 a year ago and higher than the $16.92 anticipated for the closing of the YCB acquisition.

We continue to anticipate a competitive loan environment impacted by an extended lower for longer interest rate scenario with the flatter yield curve, which will continue to impact our net interest margin as existing loans re-priced and new loans are booked.

In addition, the continued execution of our balance sheet remix strategy, as we delayed the financial impact of crossing the $10 billion asset threshold, will also have somewhat of an impact in the near-term. Although, reducing the size of our investment portfolio is part of our longer term strategy.

At this time, our most likely net interest income projections include one single or one federal funds rate increase in this quarter, in December; and one increased towards the end of 2017. However, our 2017 projection may change based upon more recent economies forecasts.

In addition, we continue to anticipate 5 to 10 basis points of accretion from the YCB acquisition in our net interest margin. Lastly, we still anticipate mid-single overall loan growth, which we plan to fund with normal securities portfolio runoffs and as necessary short-term borrowings. We’re now ready to take your questions.

Operator, would you please review the instructions?.

[Operator Instructions] And our first question will come from Bob Ramsey of FBR Capital Markets..

Bob, on merger, I want to be sure understood you correctly, you said from the acquisition, you guys are expecting 5 to 7 basis points of margin accretion, that’s on top of, I guess, where you said, I know you had de minimis amount in the third quarter, but that’s fourth versus third?.

Yes, back in April..

And then, as you think about going forward from here, the given that the balance sheet strategy is going to be one of really remixing those assets, is it fair to assume outside of any change in rates, so there would be modest positive bias in that interest margin? Is that you shift to higher yielding assets?.

That’s correct, we will be controlling the size and reducing the size the investment portfolio which in and of itself would have a positive as loans yields even in its compressed or longer rate environment, which still be higher than investment security yields, as we reinvest securities.

And our cost to funds is pretty much flat at this point, there could be some adjustments on the TruPS and our borrowings based upon LIBOR, but deposit costs are pretty much -- are expected to remain fairly flat in this environment.

So, yes, we also have enhancements just from the earnings assets and costing liabilities of YCB even before you apply purchase accounting. Recall, their loan to deposit ratio was higher than ours going in..

Okay. And if the Fed does raise rate to December, which seems to be the consensus see you at this point.

What does 125 basis point rate move at the sort end due to your Tier margin?.

We haven’t provided guidance on that, relative to our most likely interest rate forecast in the past. It is -- as we’ve said in our 10-Q under the market sensitivity, it generally would provide a positive influence of a slight amount to the net interest margin. I wouldn't anticipate it's dollar for dollar obviously..

[Operator Instructions] And our next question will come from Catherine Mealor of KBW. Ms. Mealor, your line has been opened..

Todd, I think you mentioned in your prepared remarks about employee benefits. They declined against quarter over quarter from 7.3 to 6.3, can you talk about what drove that decline and how we should we think about that line moving forward..

In the second quarter, we had higher healthcare costs, we're self insured and third quarter we actually had lower costs.

So, that is the primary adjustment, most of the other categories were similar there's little bit of adjustment to differed comp in the third quarter versus the second but that's the biggest change between the second and the third quarter Catherine and so that will bounce around as claims come in.

Might be a little bit higher in the fourth quarter, obviously, we have YCB as part of it, part of the total picture now as well..

Okay, and then maybe, if we could assume a level of higher incentive comp in that line also in the fourth quarter..

Well, I wouldn't say percentage wise but the dollars would be higher to recognize some of the folks from YCB as part of the total picture relative to our base case, incentive compensation I think will adequately accrue to the end of the third quarter for what we would intend to pay out to our own executives and senior folks on the revenue side, so there'd just be a minor tweaking for YCB..

Great then, on the tax rate a little lower this quarter, any guidance for the tax rate into the back half of the year?.

Yes, we're taking this you know before we've been sort of been end of June when we're not either GAAP or not anticipating the closing of YCB so it was over 27% now in the mid 26 range 26.5 to be exact and you know I would look for that to continue in the fourth quarter.

The primary reason for the reduction Catherine, well there's two reasons really, one is the higher, the merger related expenses most of which deductible so those are in the third quarter and then the overall effective tax rate at YCB going into the merger was lower than ours because of a higher percentage of tax exempt securities and bank on life insurance and some other strategy, so most of that will, even though we restructured some of the investment portfolio most of that will accrue to our bottom line going forward..

Got it, okay, that's all for me, if I could ask one more on the margin just as a follow-up onto Bob's question.

So, I think, we talked last quarter about you mentioned that given YCB's higher margin, the pro forma margin, if you just kind of put the two companies together were about 5 to 10 basis points higher, and then so your guidance, then that you'll -- then had on top of that another 5 to 7 bps of fair value accretion on top of that from the general base case margin moving higher?.

That’s not true..

Not, over thinking that, okay..

Well, I wouldn’t say, we're over thinking it.

My comment back in May was addressing both accretion in the early quarters as well as the inherent higher margin of their balance sheet, and again reflective of slight to lower deposit cost, more transaction accountancy than CDs, and a better mix on the asset side, and higher loans to total deposits, more that being commercial loans.

So, those are three other factors that they had a higher margin for. They also had their own accretion from the FFKY merger, a year and half ago. We’re supplementing that, revaluating all of that at this point. So, that’s all included in that, that 5 to 10 basis points that I quoted..

The next question will come from Daniel Cardenas of Raymond James..

Quick question, perhaps I missed in you opening comments, but the OREO increased that we saw in this quarter, is that all acquisition related?.

Yes, it is all acquisition related, there was no increase to portfolio of real estate is a result of our own book..

Okay. And then as I look at your reserve levels, obviously, it reflects the mark-to-market adjustments.

But as the YCB loans begin to renew, what are your thoughts on reserving for those loans going forward?.

Well, the mark-to-market should give us some stability in that, in going forward, we would not anticipate for acquired loans that we would need a provision in the first year or so, and we generally factor that into our expectations for earnings in our model. That was true with both fidelity and ESB. I have no reason to believe wouldn’t be true here.

You have both the credit markets as well as an interest mark in the portfolio. The interest mark will be credible or the net mark on the good books showed a stake and the non-accretive book portion, which is the credit market on the call of the bad book, which is very in minimal here, would not be accreted and less cash flow estimates would change.

So, all that in factored in, and while we have provided guidance on the provision, and it will around quarter-to-quarter depending upon a charge-off here or a loan down integrated there, in this. But I guess, we would call, pretty much of pristine credit quality environment.

But I wouldn’t anticipate an increase to that in the short run from the acquisition..

We also did a very deep dive as is our custom on their loan book to due diligence and looked at the majority of loans in the portfolio. So, I feel like we understand what we acquired..

It might also remind you we anticipate it loan sales, that was in the merger agreement, we talked about it back at announcement in that was consummated as of closing. Some of the under performing loans that we identified that Todd just mentioned..

And how much was that?.

Very fast..

And then as I think about one-time charges, deal-related charges, are those pretty much done, or will we see a little bit more in Q4..

You'll see a little bit more in Q4, there's a couple more contracts that need to be terminated. Some severance payments that will be made that are required to be accrued over the severance period.

As I said, we're going to convert in early November there will be some changes to the employment towards the end of that month which should benefit us later in the quarter, but a lot of the 25 million in merger-related expenses that we identified at the time of announcement, I wouldn't say a lot, but a portion of those have been pushed back, have been recorded on the final books if you will of YCB.

So, I would tell you that our 10.5 million that we recognized to date on a pretax basis is below what our estimates were for merger related expenses on our side. And I would think that we got between 2 million and 3 million more to take at this point from what I know today..

And our next question comes from Casey Whitman of Sandler O'Neill.

Just a follow-up on the questions on expenses, can you give us a sense for where you think the run rate for expenses will be next year assuming the 75% expected cost saves on YCB?.

I'm looking, Casey, pardon me for shuffling papers. We haven't completed our plan for 2017 yet, we're still focused on that, particularly we'll get a new net interest income forecast after we'll able to combine the general ledgers with core conversion coming up next weekend.

But relative to expenses, what I have is a run rate that is in the fourth quarter and you know projecting some cost savings off of that in 2017 would be reasonable.

So, the early couple of months of the fourth quarter would have more expense as we talked about this after ESP that we had some additional expenses because we keep all the people until conversion, and then we begin to get some of those back office cost savings that are all lined up at this point.

So, we'd all disclose month by month but I'm just giving you a general trend analysis that should occur and -- I guess, what I would say is, it's going to be around 12 to 15% higher than our current run rate but we haven't put dollars to it by quarter yet for next year.

And I'll be in a better position to do that for you when we have the fourth quarter call..

No, got it, that answers my question thank you, and then also can you remind us if there's a percentage of assets where you're accountable or where you would expect to run a security book down to from the 24% level now?.

As you said and as you mentioned we're 24% today. Historically, our banks run in the 20% to 25% range. So, think we could run that down to 20% over the next couple of year, that’s another $400 or $500 million. We already get couple 100 million below 10 billion.

So, if I do kind of back then ask you mass, we’ve had single-digit loan growth for really the next two years before we start pushing up against that $10 billion threshold, and that would bring the securities book down to probably 18% to 20%, somewhere in that range. And I think that’s a healthy place for us to be as we go forward, as an organization.

I think the benefit of it is, it keeps us under 10 billion, while we prepare to go over that’s added plus to it. But also just think it’s a healthier position to be rather run, 30% or so securities portfolio on a long term basis, it’s not something we wanted to do. The 18% to 20%, I think where we may end up in a couple of years..

This concludes our question-and-answer session. I would like to turn the conference back over to Todd Clossin for any closing remarks..

Thank you. We’re very pleased with our progress to-date during 2016. We’re excited about our growth opportunities in our newest markets. And we remained focused on all aspects of our strategic vision and also enhancing shareholder return. I want to thank you for joining us today and hope to see one of upcoming investor events.

Thank you and have a good afternoon..

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