Good morning, ladies and gentlemen, welcome to the WesBanco Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will an opportunity to ask question. [Operator Instructions] Please note this event is being recorded. At this time, I would like to turn the conference over to John Iannone, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Denise. Good morning. And welcome to WesBanco Inc. second quarter 2018 earnings conference call. Our second quarter 2018 earnings release, which contains consolidated financial highlights and reconciliations of non-GAAP financial measures, was issued yesterday afternoon and is available on our website at 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 our 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, 2017, and Form 10-Q for the quarter ended March 31, 2018, as well as documents subsequently filed by WesBanco with the Securities and Exchange Commission, which are available on the SEC and WesBanco website. 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 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?

Thanks you, John. Good morning everyone. On today’s call, we’ll be reviewing our results for the second quarter of 2018. Key takeaways from the call today are; we continue to execute upon our well defining growth strategies that are enabling a diversified earnings stream, build upon strong credit and expense standards, which will also ensure a long-term shareholders success. We have a diligent focus on profitability as demonstrated by record net and pretax income for the second quarter including strong expense management and credit standards. And successful implementation of our 10 billion asset threshold and associated acquisition strategies, as we completed the merger with First Sentry Bancshares including the converging of its data processing system and received all necessary regulatory and shareholder approvals for our merger with Farmers Capital Bank Corporation. We're pleased with our performance during the second quarter, as we delivered record results by remaining focused on generating positive operating leverage and profitability through effective execution of our strategies related to long-term growth, expense management and strategic acquisitions. Net income excluding merger-related expenses for the three months ended June 30, 2018, increased 42% year-over-year to $37 million or $0.80 per diluted share, and for the six months period, net income excluding merger-related expenses increased 35% year-over-year to $71 million or $1.57 per diluted share. Underlying these strong results, was the performance of our core businesses combined with diligent discretionary cost control, as year-to-date income before provision for credit losses and income taxes and excluding merger-related costs increased 16% year-over-year to $91 million. Furthermore, our year-to-date efficiency ratio improved to 216 basis points year-over-year to 54.7%, which is before any targeted cost savings from the merger with First Sentry. Thus, we generated solid profitability ratios with the core return on average assets of 1.38%, and a core return on…

Thanks Todd and good morning, everyone. We reported strong year-over-year growth in both pretax and after-tax earnings and displayed solid expense management, both quarter over quarter, as well as year-over-year. For the six month ended June 30, 2018, we reported GAAP net income of 66.7 million, and earnings per diluted share of the $1.47, as compared to 52.2 million or $1.19 per diluted share percent the same period last year. Excluding after-tax merger related expenses for both periods, net income increased 35.4% to 71.2 million with earnings per diluted share of $0.38 to a $1.57. Year-to-date, the quarter return on average assets was 1.37% in the quarter core return on average tangible equity was 17.53%. For the three months ended June 30, 2018, we reported GAAP net income of 33.2 million and earnings per diluted share of $0.71, as compared to 26.3 million and $0.60, respectively, in the prior year period. Once again, excluding after-tax merger related expenses. Net income increased 42.2% to 37.4 million and earnings per diluted share would have increased 33.3% to $0.80. For the first quarter, core returns on average assets and average tangible equity were 1.38% and 17.85%, respectively. And as a reminder, the financial results for First Sentry have been included in Wesbanco's results, subsequent to the merger date of April 5th. Turning now to balance sheet, total assets as of June 30, 2018, grew 10.9 billion year-over-year reflecting approximately 700 million of assets from the acquisition of First Sentry and the first quarter increase in the securities portfolio, as we refocus on growing total earning assets after the beginning of this year in relation to our crossing the $10 billion asset threshold. Furthermore, total portfolio loans of 6.8 billion increased 6.3% compared to the prior year due to the acquisition of First Sentry.…

I will Mr. Young. Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question will be from Steve Moss of B. Riley FBR. Please go ahead.

Just want to start off on the loan growth front you talked about commercial and resi loan pipelines being solid here, just particularly on commercial what industries are you seeing demand for, and kind of just talk us through expectations there?

I would say regard to industries it's pretty much across the board on the C&I side from an industry perspective, I would tell you there is some reluctance out there on the part of businesses to pull the trigger on plant expansions, equipments, things like that, we’re not sure what’s going on with tariffs, so there’s some uncertainty out there with regard to that. So, we are seeing our share I think of opportunities that are coming up with our teams that are positioned in each of those markets but not anyone particular industry, we don’t lean heavily into the energy industry. Some people might think because were located, that something might drive a concentration but we don’t lend into it so that’s not one. When you look at manufacturers, you look at wholesalers a lot of our markets with the highways that are there you got good very distribution systems for warehousing. So we are seeing just a general strong economy, but not a tremendous amount of borrowing, but my clients pipelines are getting better and getting stronger and we’re looking at lots of opportunities -- just like to get people have a little more certainty out there about with the next couple of year is going to look like before they pull the trigger.

Okay, good to hear. And then on the indirect auto, obviously, it's been running off here. I'm wondering, is there a point or an interest rate that you expect that will turn around and, perhaps, start growing?

Yes we’re watching that -- it's you get down to a certain level, consumers only 5% of our portfolio now, so the indirect is going to be a fairly small piece of the portfolio and at some point that will stop. But we’re really focused as the top performer more on the home-equity side. So we’re not going to take the indirect down to zero but it will continue to -- I think continue to drop. I think when I look over the next 10 years, it'd rather be typically in the mid-west and the mid-south our markets -- I'd rather be growing the home-equity portfolio. And then, a lot banks our size that are strong growth in indirect, it's used cards and it's RVs, its motorcycles and ATVs and that's not where I want to be over the next 10 years. I would rather be in good solid homes with home-equity behind the mid west and the mid south. So I think that's the right strategy for us over the next 10 years, but the answer to your original question, there will be some balancing point, I think we may be getting close to that and not quite there yet.

And then third question here just on the tax rate here, sounds like it's going a bit lower relative to where it's been. I'm wondering, Bob, is that kind of like a good range, not just for the second half of 2018, but also 2019 or could it go a little bit lower because of the new market tax credits?

The new market tax credits once we say over the next couple years -- I think what we talked about when we announced those earlier this year was -- it was between the 0.5 percentage point to 1 percentage point impact on the effective tax rate. I had given you a range it was little bit higher this quarter, primarily because of the earnings growth in the second quarter and analyzing that for the year. But the new markets tax credit would have the primary impact. When I say other taxable income strategies, best caveats for normal tax planning that one would do in the state municipal tax exempt portfolio or other strategies. So that's a caveat only, but the range I had given you is what I'm thinking at this point. As prior to Farmers, but Farmers had a similar effective tax rates, so I don't think that's going to have much of an impact on it for the rest of the year.

And the next question will be from Stuart Lotz of KBW. Please go ahead.

Congratulations on the speedy approval of the FFKT acquisition. Just curious when you expect that to close now for modeling purposes.

We’re stating third quarter that's we’re going to stick with that.

And then just one the expenses, I know the conversion took place this past weekend. But were there any of the FTSB cost saves baked into? Or are the second quarter results or is that mainly coming through in the third and fourth quarter here?

No, there were no cost savings on the First Sentry side in the second quarter, other than the run rate of expenses they had experienced year-to-date is a little bit lower on a core basis, but not significantly. And the 5 million we are expecting is the 38% cost savings on their $13 million a year of run rate expenses when they were independent, it is expected to be 75% in the balance of this year and the rest in 2019. Cost savings and the salaries and employee benefits line and then data processing and equipment expense lines will be starting in the middle part of this quarter.

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

Follow up on the expense question earlier. Bob you mentioned the typical merit step up in 2Q. Does that also follow through a bit into 3Q as well or will that all be absorbed in the second quarter?

It does follow through in the third quarter to some degree and a reason for that is because increases come towards the latter half of the second quarter. And then there is for non-exempts --those come towards the middle of the third quarter, start of August.

And then just very good incremental improvement on the core efficiency front, kind of mid 55% -- mid 50% range. Just curious if you guys could help us out with your thoughts on sort of where this could shake out as you absorb the cost saves of the two deals?

Well, there is a lot of factors involved as you mentioned. We got a couple of deals going on, obviously we got Durbin in the back half of '19. We lost a lot of initiatives underway with regard to continued focus on expenses and drop in expenses. And we have a number of fee initiatives underway as well too. So there is a lot of moving parts. Our plan and expectation that we talked about over the last couple of years will be the hope to keep the efficiency ratio in the 50s, but probably in the mid 50s as we go up in over $10 billion in size and continue to grow through there. So, we are focused on it but there's a lot of puts and takes, hard to know exactly what that’s going to look like in a year and half or two years from now. But we are cognizant of that ratio. It's important ratio inside of our company, the efficiency ratio. But I also want to make sure we are doing things to drive the revenue piece of it and it's not just the cost save exercise to continue to keep that where it's at or bring it down even further. It's going to be as much about the revenue growth. And you will see that Russell with the positive operating leverage this quarter and year-to-date, if you strip out the merger related expenses. For us there will only be 4% or $2 million to $2.5 million, it's pretty impressive given the amount of revenue growth. We continue to talk about positive operating leverage, as being important to the story, wealth management is an important part of that electronic banking. We are seeing some nice pull through on the residential mortgage side in terms of gain on sale and income even though we direct it little bit more to the balance sheet this quarter. So I think as Todd indicated the positive operating leverage to drive the denominator higher while holding expenses at a lower growth rate is how we plan on achieving that.Now Durbin will kick-in in the back half of '19 so that's -- as Todd pointed out there are both puts and takes.What we are trying to do is to plan for that between now and then, higher service charges to some degree, and control of the discretionary operating expense line.

Bob, just a clarifying question on the margin guide, slight increase in the back half of this year. How should we kind of size that up? Is that off of the sort of 343 base in 2Q '18 and do you guys have any fed fund increases in the back half of the year and that guide post?

We do. In our most-likely modeling have 2 factored in, but the current rate, purchase accounting accretion at 12 basis points. The guidance was 8 to 10 in the back half of the year. So there's a little bit of drift south on purchase accounting that we think should be offset slightly by the asset sensitivity in there in the balance sheet. There's fewer loans at floors than there were a year ago for instance. But offsetting that is a comment I made about higher deposit betas we would now expect. We were going to be able to continue to run at 23%, although, most of the increase so far in interest-bearing deposits has been on the public funds line. And then in terms of total cost of funds, the maturing borrowings, there'll be a little bit of pick up from Farmers. We talked about that on the Farmers announcement call. We're still finalizing our accretion there since we haven't yet closed, but there'll be some pickup from that as well. And then keep in mind that Farmers core margin is a little bit higher than ours. They pulled 380 in the second quarter, so there is some inherent growth from their core margin as well.

Okay, very helpful. And then last one on the loan growth expectations for the back half of this year, you guys had, in the past, talked about a low to mid-single digits, obviously, pay down's quite a frustration for you in the industry. But based on comments around the pipeline, is that sort of low to mid-single digit core organic growth, something you guys would expect to achieve?

I think these were on a long-term basis, yes, that would be something we'd still plan to try to be in line with that. And we said that over the last 4 or 5 years, and you would say that over the long-term as well too. Just don't know what the economy is going to give you over the next year or two. I think we'll get our share of it, but I don't know what that will be. But on a long-term basis, I think low to mid-single digit is still a pretty good idea for us to where we've been so I think it's where we'll stay.

And at this time, we will conclude our question-and-answer session. I would like to hand the conference over to Todd Clossin for any closing remarks.

Thank you. We remain well positioned for success as we focus on profitability through solid execution of our well-defined, long-term growth strategies, without sacrificing the legacy of our credit quality and our regulatory compliance. Our dedication and diligence will continue, I think, to reward our shareholders through long-term value enhancement. And I want to thank you all for joining us today and look forward to seeing you at an upcoming Investor event. Thank you, and have a great day.

Thank you, sir. Ladies and gentlemen, the conference have concluded. Thank you for attending today’s presentation. At this time, you may disconnect your lines.