Good morning, ladies and gentlemen and welcome to the WesBanco Fourth Quarter 2018 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] Those listening thru webcast may submit questions throughout the event by clicking the word questions on your screen. Please note this event is being recorded. I'd 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.’s Fourth Quarter 2018 Earnings Conference Call. Our fourth 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, 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 quarters ended March 31, June 30, 2018, and September 30, 2018 as well as documents subsequently filed by WesBanco with the Securities and Exchange Commission, which are available on 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 I, Item 1A. Such statements are subject to important factors that can 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’ll be reviewing our results for the fourth quarter of 2018. Key takeaways from the call today are; 2018 was another successful year for WesBanco as we successfully executed upon our well-defined growth strategies. We have and continue to diversify and strengthen our franchise. We remain diligently focused on credit quality, profitability and positive operating leverage and strong underlying fundamentals including our core deposit funding advantage will be a benefit during 2019. Solid execution of our strategies and strong fundamentals drove record earnings of $143 million during 2018; but when excluding merger cost and the impact of a reevaluation of deferred tax assets last year, net income increased 46% to $157 million, borrowings per share increased 31% to $3.21. On a similar basis, these earnings generated strong profitability ratios for 2018 with core returns on average assets and average tangible equity of 1.39% and 17.78%, respectively. For the three months ended December 31, net income excluding merger-related expenses was $45 million or $0.82 per diluted share. 2018 was another successful year for WesBanco as well as a year full of milestones for us. As I mentioned, we reported record earnings with net income surpassing $143 million and income before provisions for credit losses and income taxes increasing 15% year-over-year to more than $182 million. We have continued to benefit from our core funding advantage as demonstrated by a total deposit beta of only 12% on the four federal funds rate increases during 2018. We remain diligent on expense management while continuing to make technology and staffing investments to support future growth, helping to drive our 2018 efficiency ratio at 54.6%, a year-over-year improvement of 184 basis points. Our credit quality ratios have continued to improve to be at or near historic…

Thanks, Todd and good morning, everyone. We reported strong profitability with your year-over-year growth in both pre-tax and after-tax earnings and continue to display solid credit quality and expense management. For the 12 months ended December 31, 2018, we reported GAAP net income of $143.1 million and earnings per diluted share of $2.92 as compared to $94.5 million, or $2.14 per diluted share, for the same period last year. Excluding after-tax merger-related expenses from both periods, as well as the 2017 net deferred tax asset revaluation, net income increased 45.7%, $257.2 million, with earnings per diluted share up $0.76 to $3.21 per share. For the three months ended December 31, 2018, we reported GAAP net income of $43.9 million and earnings per diluted share of $0.80 as compared to $15.9 million and $0.36 per share, respectively, in the prior year's period. Excluding after-tax merger-related expenses from both periods and the net deferred tax asset revaluation in the 2017 period, net income increased 55.4% to $45 million and earnings per diluted share increased 24.2% to $0.82 per share. As a reminder, financial results for First Sentry and Farmers Capital, our two acquisitions last year, have been included in WesBanco’s results subsequent to their respective merger dates of April 5 and August 20, 2018. Furthermore, total portfolio loan of $7.7 billion, increased 20.7% compared with the prior year due to the -- due to both acquisitions. The strength of our residential mortgage lending program continue to drive strong loan originations that are better than the residential mortgage market nationwide. Our total year-to-date originations, which were up 23% year-over-year, continue to be driven by home purchases, representing approximately 80% of total volume including construction relatively consistent with 2017’s rate as refinances have continued to drop in the marketplace. Furthermore, while we continue in…

Thank you sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And your first question this morning will be from Casey Whitman of Sandler O'Neill. Please go ahead.

Nice quarter. I just wanted to circle back on the accretion guidance you guys just gave. So I think you said mid-teens expected accretion. Just to be clear, are you talking about mid-teens margin impact like basis points or dollar amount in millions?

No. That's margin impact. So 23 basis points in the fourth quarter. We’re expecting mid-teens beginning in the first quarter of 2019 and then a reduction of that as we proceed through the year and into 2020 of one, maybe two basis points a quarter. Prepayments will impact that as well.

Okay. And it sounds like your core margin guidance is for that being relatively flat assuming one rate hike. So what do you think -- or where does your guidance move to if we don't get another rate hike?

It would impact by one basis point to two basis points for the year. That's about the impact of each 25 basis points increase.

And maybe I'll circle back to just your comments around loan growth. So it sounds like we could maybe expect loans to grow a bit in 2019. But do you still think we're a few quarters out from seeing some of that growth. Or do you think we start to see a little bit of pick-up earlier than that?

Yeah. I think as we said ex-consumer, we were down about 1.3%. But I – maybe give a little color on that. We had four performing loans about $46 million that we either exited or reduced to either being outside of our risk tolerance, or maybe a little larger exposure than maybe we wanted with a couple of companies that are good performing companies. So we brought in some other banks to share some of that growing exposure. Excluding those and some other smaller loans, we kind of managed exposures. I’m really kind of looking at loans as essentially flat year-over-year, again, driven by active exposure management. Pipelines, I mentioned a little bit stronger going into the fourth quarter of this year -- first quarter of this year than going into the first quarter of last year. And we would expect the commercial real estate pay downs and CRE that's moving to the secondary market to start to stabilize at some point in 2019 as you kind of wash through all that. And we did see that slow down a little bit toward the end of '18 and the very beginning of '19. And our strategy in terms of reducing parts of the consumer portfolio, the risk return piece of that, it's really stabilized over the last couple of months. And we think we're kind of where we need to be on that piece of it. So longer term, we would still think –low to mid-single digit loan growth once the market dynamics return to a little bit of a more normalized level and that’s kind of our view on it at this point.

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

Maybe just looking at the balance sheet again on the deposit growth, it looks like those were down kind of quarter-over-quarter. Can you walk me through if -- was there any kind of one-time items or seasonality in your public funds that impacted that?

I would tell you, yeah, obviously on a year-over-year basis excluding CDs we were up 2.5%. But in the fourth quarter, you typically have some movement in some of the public funds. I’d also kind of sorting through two mergers that we went through as well to while customer base has stayed strong and we didn't see a significant amount of attrition or anything like that. You will see some changes associated with that. But public funds, it’s a big business for us and you do see some fluctuations fourth quarter. Also, you'll see some fluctuations in different times in both directions in the first quarter as well.

And then maybe just on the expense growth number, maybe just outside of Farmers. Can you maybe just guide us to where we should be thinking about the core expense growth rate kind of going into 2019. I know you mentioned kind of marketing expenses ramping up and the FDIC insurance expense also kind of increasing. If you could quantify both of those as well, that would help be helpful.

I would look at marketing expense as ramping up through the year and then just reflecting the size of the company, our budget in the past has been in that $5 billion to $6 billion area. So you would figure 25% growth on that number next year and we expect it as campaigns activate that that will proceed at a pace that would suggest higher marketing in the back half the year towards the end of the second quarter. On the FDIC side, that increase will become effective on April 1, and we're currently estimating between $1 million and $1.5 million over last year's expense, reflecting both the growth in the company again, Austin, as well as the higher assessment base or rate for banks over $10 billion. Overall guidance or comment about total expenses in the new year, first of all, you're looking at a little bit less than $70 million here in the fourth quarter if you exclude merger-related expenses. I would add back to that that deferred compensation amount. It's neutral operating income, but for purposes of operating expenses add that back. And so that, that really puts you slightly above $70 million, $70.5 million as the fourth quarter run rate. And we would see then cuts here towards the end of the first quarter and second quarter from the Farmers acquisition as we converge systems and back office in the branches. And then, you would be looking at typically 2% to 3% increase as we proceed throughout the year from that level as a result of normal mid-year salary increases and other inflationary amounts. So, it's kind of starting the year in that $71 million to $72 million level.

And then just maybe taking a step back thinking about capital and maybe just more importantly just on M&A, are we still on a pause here in 2019 or are transactions still – or kind of back on the table?

Yeah. And I appreciate the question. I think with the integration of First Sentry, which the conversion was last summer, and FFKT coming up here in the next couple of weeks, everything is going very well. So the integration, the assimilation and everything else is very much on track. Yeah, except in the last spring, a year and a half to two years or so, in terms of kind of what we saw from a pause standpoint. But I could see where we could end the pause in the second half of this year, kind of the back half of this year. If there was the right opportunity to try to do something, we would probably be willing to entertain that. Again, we've covered the $10 billion threshold very well, and we're really managing things very tightly, and I'm real well-pleased with the team, not only the existing legacy WesBanco team but the new employees who have come on from First Sentry and FFKT. And really, it feels very much like one bank has been together a long time. So I think, as a result of that, we can look at something in the back half of this year or early 2020.

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

Hi. Good morning. This is Zach Weiss on for Steve today.

Good morning.

So I guess on fee income here, curious. Your outlook, maybe outside of the Durbin impact, just on trust fees and maybe mortgage how you guys are thinking about that for 2019.

Let me start off. You might want to add some additional in here. Obviously, we had the market impact on the trust fees in the fourth quarter and markets rebounded a little bit so far in the first quarter. We’ll see how the rest of the quarter goes. We also have our fee program, our fee initiative we mentioned in the past, I think kind of Phase 1 of that was ATM fees and that was pretty much addressed in the early part of 2018. We also are continuing to look at other fees where we are below markets, precedently below market and a lot of places and addressing those over time as well as just more discipline around fee waivers and being able to control those type of things. And we think those are some pretty meaningful numbers that are going to – part of it it’s in 2018, part of its in 2019, art of it is going to be 2020. I mean it's 20 or 30 different little initiatives, all of which have a different timeline and a different process associated with them and different approval processes associated with them. But we would expect those two to give us some additional fee growth in future quarters as we implement them. Bob, what else would you add to that?

Well, I’d say that it's kind of obvious that the first two quarters are going to have higher income in the back half of the year. And as I said during my prepared remarks, we do expect a slightly negative influence on the efficiency ratio in the back half the year from a lower base here in the first half of the year. So, I would kind of look at the fourth quarter as a placeholder for our run rate at this point. Yes, there is some impact on trust fees but typically the first quarter is a better quarter for us on trust fees because of tax preparation fees primarily. And we do expect mortgage-backed to continue to ramp up despite lower refis and lower overall business in the economy. And that's just because we're hiring more originators and taking business from others and have some very good programs with some great leadership as well. So, those are my main guidance points. The electronic banking will continue to increase in the first half of the year before you'll see that line item reflect urban in the back half of the year.

Okay. Thank you. And then on the balance sheet, in terms of the securities balances, should we expect those to be relatively flat for the year?

Yeah. Our anticipation isn't to dramatically increase them as a percentage of the balance sheet. I think we're pretty comfortable where we’re at. I mean we realize we're -- margin and expense controls is what's driving a lot of the earnings growth and the positive operating leverage right now. And we do need to grow the balance sheet. Loans, in particular, are going to need to grow over time moving forward. So we don't have a real pessimistic view of the economy or anything like that. We're just taking the opportunity to position the home portfolio a little bit for long-term success. But we're not going to be ramping up the securities portfolio to offset slower loan growth. That isn't our plan.

And our next question will be from Russell Gunther of D. A. Davidson. Please go ahead.

I just wanted to circle back to the loan growth conversation. Todd, appreciate your comments around the low- to mid-single-digit range for next year. But if we think about the two recent deals, that $1.4 billion in loan balances, is there a bucket of that that you guys kind of ring fence your thought about in terms of intended rundown or a managed decline or have pro forma balances there kind of shook out where you thought. I’m just trying to get a sense if there has been anything else kind of weighing on loan balances in addition of the industry headwind?

Yeah. Both of those two mergers is customary with prior mergers. We did sell some loans right before or right at the time of the merger was completed. So, we kind of moved those things off the books early on that we didn't think really fit with our profile going forward. And the lending teams have all stayed intact and the plan isn’t to run loan balances down or anything like that at all. I mean, a part of the reason we’re going into those markets is because of the household growth and the demographic growth and the business environment. They're growing those markets, Louisville, Lexington in particular were growing faster than some of our legacy markets. So, we think that'll be good for us from a loan growth perspective and a balance sheet perspective going forward. But we're comfortable with the credit that we picked up. We're comfortable with the loan categories. And we're comfortable with the businesses. So, the plan would be to expand it and not to intentionally run down any part of that.

Great. I appreciate that. And then Todd, as a follow-up there, what do you think the biggest delta in your mind is to achieving that mid-single-digit growth versus the low end to the range?

Yeah. It’s a great question. I spent some time in the market the last couple of weeks with our lending teams, and I think there still is just uncertainty out there, just some hesitancy to want to pull the trigger on expansion. I'm hearing a lot from customers around. I had a hard time finding people. They could generate additional revenue, work on additional contracts, things like that, but they're all struggling to find additional people to be able to capitalize on that. But I also think there is some conservatism there in terms of really not being 100% sure of what's going on from an economic standpoint. You wouldn't think that the trade wars would have a big impact on a lot of our companies. But a lot of them are bringing in aluminum and steel and things like that and they're a little nervous about where those prices are going, so they're trying not to get overextended. So I think there's just a lack of, maybe the lack of animal spirits I guess as some people say and a conservatism that's out there and people are sitting on cash balances, businesses are sitting on cash balances. So I think if we can get some more, I mean less volatility on some of those talks and some more definite direction that people can plan for, then I think you might see a little more activity out there. But I just – I attribute it to people just kind of pulling in the horns and being conservative right now.

And I appreciate your thoughts there And then just last one for me. You mentioned a willingness to take a look at M&A again on the back half of the year the opportunity arose. Can you just remind us from a size perspective, geography perspective sort of where you're focused with deals going forward?

Yeah. Very much same as in the past. I mean, we're looking at up a 6-hour drive time from our Wheeling headquarters here, so you can see the map and where that six hours would be. We're not the bank that's going to be jumping over states and going down south and out west and stuff like that. We'll stay within that that market that we've stayed in historically and if it's an in-market deal, obviously higher expense saves. If it's an out-of-market deal, then we'd be looking at growth characteristics that would be stronger than our legacy markets Very similar to what you saw with FFKT and even your community bank a couple of years ago. That would be the plan.

[Operator Instructions] Your next question will be from Stuart Lotz of KBW. Please go ahead.

Most of my questions have been asked but maybe just one follow-up around credit cost or credit cost but maybe just one follow-up around credit costs or credit cost expectations for next year. I know the provision was higher this quarter related to some charge-offs but any outlook for 2019, what we can expect from a quarter-to-quarter provision expense.

We don't see a whole lot of change from the last couple of years. I mean, everything is really quiet. It really all looks very, very good. I think our first or second – second and third quarter were almost nothing. I mean, third quarter was actually a recovery. So we just don't see anything there at all. I think for the year, the number was just incredibly low. We don't see anything impacting that. We don't see things in the pipeline deteriorating. We don't have any exposure or concentration issues in areas or industries that we're really concerned about, so kind of steady as she goes. And I would expect the next few quarters, at this point, to look very similar to what we had in the past.

Right. Well, yeah, that's all I had. So thank you, guys.

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

Thank you. So we remain focused on maintaining a strong financial institution for our shareholders and one that is positioned well for the future as we just discussed. We'll continue to keep discipline around our business model, our credit decisions and our growth investments as we continue to deliver long-term profitability and shareholder value. And I want to thank you for joining us today. Hope I get the opportunity to see you at an upcoming investor event later this winter or early spring. Thank you.

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today’s presentation. You may now disconnect your lines.