Good morning, and welcome to the WesBanco Fourth Quarter 2017 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, Investor Relations. Please go ahead.

Thank you, Kerry. Good morning, and welcome to WesBanco Inc.'s fourth quarter and full-year 2017 earnings conference call. Our fourth quarter 2017 earnings release, which contains consolidated financial highlights and 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 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, 2016 and Forms 10-Q for the quarters ended March 31, June 30, and September 30, 2017, 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 fact 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 1, 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 morning, everyone. On today's call, we will be reviewing our results for the fourth quarter of 2017. Key takeaways from the call today are - 2017 was another successful year for WesBanco as we executed upon our long-term operation and growth plans. We have demonstrated continued strength in credit quality, profitability measures, and expense management, and we remain focused on long-term success of our Company and our shareholders. As I mentioned, we had another successful year in 2017 as we reported record earnings surpassing $107 million for the year after adjusting for the deferred tax asset revaluation and merger costs were $2.45 for fully diluted share. These record earnings generated solid profitability ratios for 2017 with return on average assets of 1.09% and return on average tangible equity of 13.90%. For the three months ended December 31, we are in fully diluted earnings per share of $0.66 on net income of $29 million when excluding the impacts of the revaluation of deferred tax assets and merger cost, which was an increase of 11.6% from the fourth quarter of 2016. And we generated strong fourth quarter probability ratios with return on average assets of 1.16% and return on average tangible equity of 14.36% when excluding the same items. As our various metrics demonstrate, we remain committed to maintaining a strong financial institution for our shareholders and continue to be well positioned for the future. In addition to our strong profitability ratios, our consolidated and bank level regulatory capital ratios are well above the applicable well capitalized standards, promulgated by bank regulators and the Basel III capital standards. We continue to demonstrate strength across our credit quality measures as well as here to our strong legacy of credit and risk management. As I mentioned, we reported record annual…

Thanks Todd, and good morning. We generated mid single-digit loan growth in our strategic focus categories and continue to exhibit strong expense control as we lower discretionary costs both quarter-over-quarter as well as year-over-year. For the 12 months ending December 31, 2017, we reported net income of $94.5 million and earnings per diluted share of $2.14, reflecting a $12.8 million net deferred tax asset revaluation, as a result of the recently enacted Federal tax reform legislation, and $0.6 million in merger-related expenses. Excluding these expenses, net income would have increased 13.3% to $107.9 million from $95.3 million with earnings per diluted share increasing 3.4% to $2.45. In addition, the year-to-date return on average assets was 1.09% and return on average tangible equity was 13.90% when excluding the items mentioned. For the three months ending December 31, 2017, we reported net income of $15.9 million and earnings per diluted share of $0.36 as compared to $24.2 million and $0.55 respectively in the prior year period. When excluding net deferred tax asset revaluation and merger-related expenses, net income would have increased 11.6% to $29.0 million, and earnings per diluted share would have increased 11.9% to $0.66. For the fourth quarter, excluding the items mentioned, return on average assets and return on average tangible equity were 1.16% and 14.36% respectively. Unless otherwise stated, my remaining earnings related comments will focus on the fourth quarter's results and exclude the impact of the net deferred tax asset revaluation in the current period and restructuring and merger-related expenses in both periods. As a reminder, financial results for the former Your Community Bankshares have been included in WesBanco's financial results since the merger date of September 9, 2016. Let's turn to the balance sheet. Total assets as of December 31, 2017 remained at $9.8 billion year-over-year with…

Sure. We will now begin the question-and-answer session. [Operator Instructions] The first question will come from Catherine Mealor of KBW. Please go ahead.

Good morning, Catherine.

Good morning. I'm going to start with just the balance sheet first. First on the securities portfolio, you'll have continued to manage the securities portfolio down as a low percentage of average earning assets, just as you managed under $10 billion. So can you talk a little bit about now that we're going to be crossing $10 billion next year, what your strategy is for that remix, and then also how the lower tax rate may play into that strategy as well?

Yes. I'll let Bob talk about the tax aspect of it, but the thought is that the, the portfolio as a percentage of the balance sheet would stay relatively consistent with where it is today as we crossed $10 billion and just continue as the bank grows to continue to represent around 23% or so of it. So the plan wouldn't be to continue to shrink it to make room for loan growth. The thought would be the loan growth and securities portfolio would both lift us now that we're going be pass $10 billion.

And Catherine on the tax exempt side, I had a caveat in my discussion about the range that we expect for the effective tax rate in 2018. And it's really - that wide range is really - we're taking into account that we could have some tax strategies relative to low income housing tax credits relative to the portion of the portfolio associated with tax exempt income relative to bank owned life insurance. Some of these things will play out over time, but indeed they're worth less as pretax income strategies than the old days of 35% statutory tax rates. So our guidance right now if you will not knowing how those issues might develop over the next few months is that the muni bond portfolio, which is 38% of that total $2.3 million might gradually come down as a percentage of the total portfolio and thus impact both the margin calculation as well as the tactics or the effective tax rate for the year. But I don't expect any big moves early on, and in fact, most of our municipal bonds are in the held-to-maturity portion of the portfolio.

Okay. That's helpful. Thank you. And then also thinking about loan growth and you said a little bit in your remarks Todd that how do we think about how much loan growth could improve going into this year now that you're not managing under $10 billion. Is it really just - is it more of a function of as of the balance sheet from how you manage the securities or do you also see some upside in your loan growth next year?

Yes. I'm glad that you asked the question. We never sent the message to our lenders to slow down at all, so the plan was always to grow the balance sheet the loan side and shrink the securities portfolio to stay under $10 billion, but there was never a plan in place to slow that down to commercial lenders. Now some of things we did do over the last couple of years from more of a risk management perspective, we will start to reduce the portfolio on a multifamily side as well as the hotel side a couple of years ago. And on the indirect auto, we raised credit qualities underwriting a couple years ago and raised rates. So we had some strategies in place that obviously the consumer portfolio now being 5% of the total portfolio. That was very strategic to try to reduce that down, but with the commercial group, we continue to let them run strong. When we look at 2018, I think an important thing, and I mentioned a little bit in my comments was the quarter-to-quarter fluctuation in the commercial real estate portfolio due to loans going to the secondary market, which is part of that business. We would expect that to happen. We typically average a little bit below $50 million a quarter in those type of loans going to the secondary market. And in the fourth quarter that number was close to $120 million. So it was a $70 million delta just in the fourth quarter by just a couple of loans that happened to go to the secondary market. So production in the fourth quarter was actually our second highest production quarter of the year. So it's not a production issue. It was all really around just the timing of the payoffs.…

Okay, great. Thank you for the color.

Sure.

The next question will come from Austin Nicholas of Stephens. Please go ahead.

Good morning.

Hey, guys. Good morning. Maybe just on the shale related deposit flows. I know just looking at natural gas prices year-to-date, we've seen a pretty big move up in the 30% to 40% range. Have you seen that, I guess move up in prices reflected in any higher, call it shale related royalty payments, and I guess ultimately the deposits coming in as they picked up or is there a lag there and just any color there would be helpful?

It has, it's picked up. We're back into the eight figure amount every month and now we were there two years ago. We dropped down into the mid-70s and low seven figure range for a few different quarters. But now we're back up into the eight figure again. So it's nice to see that back and we are seeing a little more activity in the marketplace as well too related to that with regard to the oil and gas activities.

Understood. And then maybe just on that, is there any, I guess the economic development or large projects that are anticipated to come online. I know that there was maybe a secondary, I think cracker that this maybe going be built around WesBanco or around Wheeling I should say. Is there any kind of I guess tangible evidence that there is kind of increased activity given the rise in prices?

Yes. I would tell you that if you remember back with the cracker plant, the shale cracker plant up in the Beaver County, ESB, our acquisition three years ago was headquartered. And that cracker plant is obviously well underway and we're starting to see some benefits from that. There's another cracker plant planned just a little bit south, where we're sitting right now in Wheeling, just a few miles down the road. That's not been approved yet, but a lot of positive indications around that things continue to move forward positively with that. If that occurs then that would have a significant impact - significant enhancements I think to the local economy as well. And there's some other ancillary things. China has agreed to put $87 billion into the states, and that's going to help exactly where that's going to go yet, but liquid natural gas storage facilities things like that will be probably in parts of our footprint. So there are a lot of positive signs on the energy front to support the growth, but again, we're not - to talk before, we're not lending into that industry directly. We're not taking that exposures in commodity type of products.

Great. Thanks for the color.

Sure.

Maybe just last one with tax rates lower and more accretion to capital, can you maybe give us an update on how that augments your capital planning, and then within that what's the outlook for M&A ones your most recent transaction is integrated?

I'll try to tackle first part, and then make sure I answer your question in the right way with regard to capital. Obviously it has an impact on our return on equity that we look at by loan actually, our larger loan relationships that come into loan committees. We have a return on equity calculation. That's going to be impacted at a little bit obviously by some of the tax changes. So that's - talk about part of the benefit of taxes being competed away, if you start to see some of that that will probably happen in some of those areas from a return perspective. But from M&A, we continue to state our stated strategy, and I think the impact of some of the tax changes really doesn't have an impact on that from our perspective. It might on the perspective of potential sellers. But our approach is still stay within that six hour range and try to find opportunities that will get us a little farther north of $10 billion that are accretive with appropriate earn back. And we don't think that tax changes are going to have a material impact on our strategies going forward with regard to M&A.

Understood.

The comment I would make on the tangible common equity, you talked about the impact on capital ratios. And I had mentioned during my scripted remarks that there was a 14 basis point to 19 basis point change in the year end capital ratios from the DTA charge moving those down. But we will earn that capital back very quickly. And in fact the lower income tax expense in 2018 will earn back a one-time charge in less than a year. But the impact just on tangible common equity in 2018 as the tax change itself is 14 basis points to 16 basis points positive. So that's why I say you're going to earn that back pretty quickly. And it will obviously, as Todd hinted at, have a positive impact on our other operating ratios as well.

Understood. Well thanks guys. That's all I got.

Sure. Thanks.

The next question will come from Steve Moss of B. Riley FBR. Please go ahead.

Good morning, Steve.

Good morning. Just with regard to the margin outlook and the relatively stable outlook, Bob I'm wondering what you are assuming for deposit betas here?

Yes. Steve we haven't in the past disclosed our deposit betas, we've made comments around some of the larger banks and what they've disclosed. And we hinted at numbers that are higher in our modeling than what we are experiencing, but we haven't said its 20%, 30% any particular number. Obviously with 6 basis points of increase, 6 basis points or 7 basis points of increase over the past 12 months in interest bearing deposit costs, dividing that by 75 basis points of increase if you ignore the most recent one at the end of December, middle of December that's right around 10%. And I think it's fair for you all to dial in a higher percentage that's what we're basically suggesting going forward. And as you pile on increases time, after time, after time there is some sort of catch up that occurs such that as a percentage of each 25 basis point increase, you can expect that to be higher. But up until now what we have included in our modeling relative to deposit betas has not been realized from a customer perspective other than as I said the interest bearing demand deposit category, which is heavily influenced by public funds or public bonds or over $800 million. So there's a significant amount of that in that category.

That's helpful. And then for this quarter, it look like pretty good quarter for mortgage banking, again, wondering if you give us some of the details underlying production and gain on sale margin?

Yes. It's a real bright spot for us in terms of what that business has turned into over the last couple years. Part of that you can see obviously through the fee income from the sales in the secondary, but this business looks a lot different for us than it did just a couple years ago. We brought new leadership into that area. We really advanced the business along pretty significantly. We're doing some hedging now and generating some revenue off of the hedging which we didn't before. We've got other investments around disclosure desk, things like that that we're looking at as well. So not only is the business performing well for us and we're tracking talent to the business, but it's running much more efficiently, and it's much more scalable now than it was before. And it's a pretty buttoned up business for us. And as a result of turn times have come down significantly in terms of the ability to turn around a loan. And that helps us in the marketplace to be competitive and get additional business and attract additional lenders. The last thing I probably mentioned on that is that the KSI market, Kentucky, Southern Indiana, which is the former Your Community Bank franchise. We're seeing some really nice growth there in terms of talent and business in Louisville, Lexington, Elizabethtown, all those areas New Albany, Indiana and that was something we didn't have obviously a couple years ago. So we think this business is pretty well positioned for the future and we're expecting a lot out of it.

That's helpful. And in terms of just - in terms of hiring more talent should we expect a significant increase in 2018 and kind of what your thoughts on production?

Yes. I think it's always - we will take the talent that's available in - mortgage loan originators are one of those areas where there's really no budget or limitation. How many of you bring on, and you find good ones, and you're going to bring them on because they - there's a low cost associated with them and the variable cost is associated with them bringing business and then getting paid. So given the commission type structure of that business, the doors are open to hire additional mortgage loan originators, and we're actively talking in a lot of different markets with those individuals. And obviously with the First Sentry as that would come on during the first half of this year, they have a few mortgage loan originators down there, but we think that would be another additive opportunity for us as well as to make that a bigger business in that marketplace. So in some of the markets we're in now like Pittsburgh, Columbus, Cincinnati, those are really good robust markets where we've had mortgage loan operations and mortgage loan originators for a number of years. We're expanding that base in those markets, but now we're in the new markets as well to the recent acquisitions and that should only help. But I would expect us to have more mortgage loan originators a year from now than we have today. It's hard to put a number on it because a lot of it is dependent upon available talent. I think our incentive plans are competitive and it also is a business that kind of we did self out as well too. So you want to be bringing in producers, but people that don't produce wouldn't have a home in the organization. So you've got that plus and minus, but on a net basis, it ought to be increasing.

All right, thank you very much. I appreciate that.

Sure.

[Operator Instructions] The next question will come from Russell Gunther of D.A. Davidson. Please go ahead.

Good morning.

Good morning, guys. Bob, I just wanted to follow-up on your margin commentary. I think you're communicating with an expectation for a nice tight range for the year. But should we think about that after the 6 basis points to 8 basis point negative impact in the first quarter or is that something that could be recouped throughout the…

It's the former part of your comment, not the latter. So if one were to take a look at our fourth quarter margin of 343, you'd back that down 6 basis points to 7 basis points just on January 1, because you're using 21% instead of 35% of the tax exempt portfolio. And I think the reason we matching that is because it's probably a little bit higher impact for our bank than for some others because of the large percentage of our investment portfolio that is in tax exempt securities as I said earlier. Muni's are 38% of the portfolio. We still find value there and I'm not suggesting that that strategy is going to materially change over time, but it does have that kind of an impact when it's just materials, it is, more than a third of the portfolio. If you thought it was in the similar range to the low 340s, then you would back that down by that 6 basis points to 7 basis points - 6 basis points to 8 basis points that we mentioned just on day one. And now I don't expect to earn that back over the course of the next year.

Okay. Appreciate the color there, Bob. Thank you. I just have a couple kind of ticky tacky items left, most of my other questions were asked and answered. But on the other income line that was a good quarter. I think that includes the insurance services, just give a little color on what the driver was in this quarter and what you would expect going forward?

Yes, and if you look at the last five quarters as we give you in our earnings release in the statistics, you can see that bouncing around. The primary reason why that bounces around is because of the swap fees. So in any particular quarter, you're going have a more material number in swap fees than in other quarter. So third quarter, we didn't have a lot of those. In the fourth quarter, we had a significant increase, and in fact most of the increase between the third and the fourth quarter is related to swap fees. In the past, there were some joint venture income that we don't have anymore, those have been dissolved. I think we've talked about those in prior periods. And then there's a deferred comp and depending upon how that's mark to market that could influence that line item, but the offset to that is in the salaries. So hopefully that's a little bit of color. You're right, the insurance services is in there. We do have some good expectations for that in 2018 particularly, in the title business.

Okay. Very helpful. And then just switching gears to the expense side. If you guys talk a little bit about this earlier, the employee benefits line trended down nicely throughout the year, similar result in other expenses. I know you talked about managing both, but is there an ability for these to continue to drift lower or are we going to be running to kind of keep them flattish going forward?

Yes. I'd say, our focus is obviously on positive operating leverage, right. So we're going to continue to make investments in the Company, I think particularly with regard to some of the tax relief that's coming as well, make few investments nothing significant, but some investments in technology more from a customer service standpoint, product enhancements, those types of things that will be looking to do. But as you can tell from the numbers, we got the expenses dial down really well and we spend a lot of time on that. We review expense reports, TV reports nobody gets on an airplane without my approval. I mean for a company our size to do the things that we do on expenses, but it's important. And it's always been part of the DNA of our company. And as we grow, we don't want to lose that. So I think expenses will always be an important part of it, but as we grow as an organization, obviously we're going to have a bigger expense base associated with that. Looking though, where do we get the best return? Where are we getting $2 of return for every dollar of expense that we put out there which is kind of the criteria that we have? An example would be the marketing expense which you saw in the first half of last year was pretty high, second half of last year a little bit lower kind of averaged out. We're going to be this year. We're not looking to raise that number much. We are going to spread it out more evenly and we're looking for a bigger return from the marketing dollars that we spend. If I get that return, than in future years, we'll spend more on marketing. If I don't get that…

And I think his comments are probably more important than mine and mine would tend to be focused around line items. And in the fourth quarter, we did experience higher incentives as we true those up for our performance for the year, and so on the salary line item, you see a little bit higher number there. I believe a couple of you commented on that last evening. The offset to that was as Todd and you mentioned Russell, the employee benefit line. So the employee benefits did have a couple of items associated with it. They were one-time in the fourth quarter, truing up accruals for our self-funded health insurance plans. And that was back to kind of a normalized level that you saw on some of the other quarters here in the first quarter of 2018. Although, I do expect continuing savings on the pension plan in 2018 due to very good performance in 2017. Marketing, I think we talked about that. That it be shred more evenly throughout the year, but relatively the same in terms of the total year spend, assuming we're getting that adequate return on our spend, and then some of those other categories that we implemented costs saving strategies on in the third and the fourth quarter most of those should continue here into the new year. We did have a couple of one-time things that benefited us in the fourth quarter, some vendor incentive payments, lower ROE costs for instance, and I already mentioned the lower health care. So given that in the first quarter payroll costs increased as some of those payroll taxes kick back in and some of the other expense lines related to weather, for instance in the first quarter are typically higher. We would suggest to you that the numbers in the first half of the year would be before First Sentry at least would be slightly higher, would be a little bit higher than the fourth quarter run rate, more or like the third quarter.

Okay, great. Thank you, Bob. I appreciate it.

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

Hi Dan.

Good morning, guys. Just one quick question here. Given a pretty well behaved credit quality environment, I think mandible credit metrics at your company, how are you thinking about credit expenses in 2018 and beyond?

Lot of it has to do with how the economy is going to perform right. So you hope with the recent tax reform changes or tax reduction changes that you just got another couple years before the next recession hit. So we would expect similar trends to what we've had in the last year or so. And I mentioned in my comments that we don't have any material concerns about concentrations or any geographic areas, so we would expect this year to be similar to previous years at this point.

Okay, great. All my other questions have been answered. Thanks guys.

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

Thank you. We are successfully executing upon our well-defined strategies as hopefully we display through our discussion today. Our long-term operational growth plans are in place and we really remain focused on the long-term success of our Company and our organization. We think we're well positioned for success in any type of environment. We work hard to try to make sure that we stay that way. We are excited about the opportunities for the upcoming year and we look forward to providing additional value to our customers and our shareholders. And just want to thank you all for joining us today and continuing to follow our story. Have a good day.

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