Edgar Filing: WESBANCO INC

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011


¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-08467

WESBANCO, INC.

(Exact name of Registrant as specified in its charter)


WEST VIRGINIA		55-0571723
(State of incorporation)		(IRS Employer Identification No.)

1 Bank Plaza, Wheeling, WV		26003
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 304-234-9000

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ¨				Accelerated filer þ
Non-accelerated filer ¨ (Do not check if a smaller reporting company)				Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of July 26, 2011, there were 26,629,360 shares of WesBanco, Inc. common stock, $2.0833 par value, outstanding.

WESBANCO, INC.

TABLE OF CONTENTS


Item No.	ITEM	Page No.

	PART I - FINANCIAL INFORMATION

1	Financial Statements
	Consolidated Balance Sheets at June 30, 2011 (unaudited) and December 31, 2010	3
	Consolidated Statements of Income for the three and six months ended June 30, 2011 and 2010 (unaudited)	4
	Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2011 and 2010 (unaudited)	5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 (unaudited)	6
	Notes to Consolidated Financial Statements	7

2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

3	Quantitative and Qualitative Disclosures About Market Risk	40

4	Controls and Procedures	42

	PART II – OTHER INFORMATION

1	Legal Proceedings	43

2	Unregistered Sales of Equity Securities and Use of Proceeds	43

6	Exhibits	44

	Signatures	45

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WESBANCO, INC. CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
*(unaudited, in thousands, except shares)*	2011			2010



ASSETS
Cash and due from banks, including interest bearing amounts of $9,782 and $21,894, respectively	$	83,345		$	79,136
Securities:
Available-for-sale, at fair value		938,342			957,481
Held-to-maturity (fair values of $596,341 and $465,902, respectively)		586,353			468,710
Total securities		1,524,695			1,426,191
Loans held for sale		4,205			10,800
Portfolio loans, net of unearned income		3,263,046			3,288,676
Allowance for loan losses		(61,418	)		(61,051	)
Net portfolio loans		3,201,628			3,227,625
Premises and equipment, net		84,325			85,928
Accrued interest receivable		20,683			20,536
Goodwill and other intangible assets, net		284,336			285,559
Bank-owned life insurance		108,296			106,502
Other assets		114,394			119,181
Total Assets	$	5,425,907		$	5,361,458

LIABILITIES
Deposits:
Non-interest bearing demand	$	629,429		$	591,052
Interest bearing demand		495,807			481,129
Money market		897,929			854,836
Savings deposits		570,274			530,701
Certificates of deposit		1,627,900			1,714,705
Total deposits		4,221,339			4,172,423
Federal Home Loan Bank borrowings		226,897			253,606
Other short-term borrowings		208,704			187,385
Junior subordinated debt owed to unconsolidated subsidiary trusts		106,050			106,034
Total borrowings		541,651			547,025
Accrued interest payable		5,906			6,559
Other liabilities		33,974			28,588
Total Liabilities		4,802,870			4,754,595

SHAREHOLDERS’ EQUITY
Preferred stock, no par value; 1,000,000 shares authorized; none outstanding		-			-
Common stock, $2.0833 par value; 50,000,000 shares authorized; 26,633,848 shares issued in 2011 and 2010; outstanding: 26,629,360 and 26,586,953 shares in 2011 and 2010, respectively		55,487			55,487
Capital surplus		191,263			191,987
Retained earnings		375,689			361,513
Treasury stock (4,488 and 46,895 shares in 2011 and 2010, respectively, at cost)		(96	)		(1,063	)
Accumulated other comprehensive income		1,875			131
Deferred benefits for directors		(1,181	)		(1,192	)
Total Shareholders’ Equity		623,037			606,863
Total Liabilities and Shareholders’ Equity	$	5,425,907		$	5,361,458

See Notes to Consolidated Financial Statements.

WESBANCO, INC. CONSOLIDATED STATEMENTS OF INCOME


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
*(unaudited, in thousands, except shares and per share amounts)*	2011			2010			2011			2010

INTEREST AND DIVIDEND INCOME
Loans, including fees	$	44,511		$	47,911		$	88,859		$	96,285
Interest and dividends on securities:
Taxable		9,431			8,724			18,139			17,835
Tax-exempt		3,046			2,851			6,032			5,845
Total interest and dividends on securities		12,477			11,575			24,171			23,680
Other interest income		54			111			109			197
Total interest and dividend income		57,042			59,597			113,139			120,162
INTEREST EXPENSE
Interest bearing demand deposits		501			636			1,004			1,306
Money market deposits		1,208			2,185			2,779			4,127
Savings deposits		349			623			837			1,226
Certificates of deposit		7,929			9,322			15,980			19,482
Total interest expense on deposits		9,987			12,766			20,600			26,141
Federal Home Loan Bank borrowings		2,003			3,567			4,028			7,901
Other short-term borrowings		1,188			1,173			2,370			2,353
Junior subordinated debt owed to unconsolidated subsidiary trusts		811			943			1,612			1,987
Total interest expense		13,989			18,449			28,610			38,382
NET INTEREST INCOME		43,053			41,148			84,529			81,780
Provision for credit losses		6,802			11,675			14,843			23,175
Net interest income after provision for credit losses		36,251			29,473			69,686			58,605
NON-INTEREST INCOME
Trust fees		4,272			3,636			9,034			7,694
Service charges on deposits		4,889			5,701			9,111			11,018
Electronic banking fees		2,523			2,190			4,807			4,105
Net securities brokerage and insurance services revenue		1,694			1,616			3,415			3,466
Bank-owned life insurance		900			966			1,794			1,910
Net gains on sales of mortgage loans		389			569			971			1,094
Net securities gains		14			898			30			2,303
Net losses on other real estate owned and other assets		(271	)		(1,315	)		(816	)		(2,845	)
Other income		606			324			1,175			881
Total non-interest income		15,016			14,585			29,521			29,626
NON-INTEREST EXPENSE
Salaries and wages		13,800			13,362			27,385			26,576
Employee benefits		4,408			4,347			9,632			9,344
Net occupancy		2,461			2,540			5,382			5,599
Equipment		2,145			2,376			4,444			4,980
Marketing		1,642			1,155			2,647			1,785
FDIC insurance		1,015			1,683			2,669			3,288
Amortization of intangible assets		605			685			1,223			1,384
Restructuring and merger-related expenses		-			7			-			206
Other operating expenses		9,627			8,412			17,812			16,798
Total non-interest expense		35,703			34,567			71,194			69,960
Income before provision for income taxes		15,564			9,491			28,013			18,271
Provision for income taxes		3,646			1,253			5,854			2,122
NET INCOME	$	11,918		$	8,238		$	22,159		$	16,149
EARNINGS PER COMMON SHARE
Basic	$	0.45		$	0.31		$	0.83		$	0.61
Diluted	$	0.45		$	0.31		$	0.83		$	0.61
AVERAGE SHARES OUTSTANDING
Basic		26,610,450			26,577,065			26,599,791			26,572,385
Diluted		26,611,409			26,577,828			26,601,088			26,572,915
DIVIDENDS DECLARED PER COMMON SHARE	$	0.15		$	0.14		$	0.30		$	0.28

See Notes to Consolidated Financial Statements.

WESBANCO, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Six Months Ended June 30, 2011 and 2010


*(unaudited, in thousands, except* *shares and per share amounts)*	Common Stock				Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Deferred Benefits for Directors			Total
	Shares		Amount		Capital Surplus			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Deferred Benefits for Directors			Total

December 31, 2010		26,586,953	$	55,487	$	191,987		$	361,513		$	(1,063	)	$	131	$	(1,192	)	$	606,863
Net income									22,159											22,159
Other comprehensive income (1)															1,744					1,744
Total comprehensive income																				23,903
Common dividends declared ($0.30 per share)									(7,983	)										(7,983	)
Stock options exercised		1,775				(13	)					39								26
Restricted stock granted		40,632				(928	)					928								-
Stock compensation expense						228														228
Deferred benefits for directors- net						(11	)										11			-
June 30, 2011		26,629,360	$	55,487	$	191,263		$	375,689		$	(96	)	$	1,875	$	(1,181	)	$	623,037


December 31, 2009		26,567,653	$	55,487	$	192,268		$	340,788		$	(1,498	)	$	2,949	$	(1,278	)	$	588,716
Net income									16,149											16,149
Other comprehensive income (1)															7,206					7,206
Total comprehensive income																				23,355
Common dividends declared ($0.28 per share)									(7,440	)										(7,440	)
Stock options exercised		2,050				(14	)					44								30
Restricted stock granted		17,200				(390	)					390								-
Stock compensation expense						53														53
Deferred benefits for directors- net						(100	)										100			-
June 30, 2010		26,586,903	$	55,487	$	191,817		$	349,497		$	(1,064	)	$	10,155	$	(1,178	)	$	604,714

(1) The net change in other comprehensive income in 2010 and 2011 consists primarily of the net change in unrealized gains and losses in available-for-sale securities.

See Notes to Consolidated Financial Statements.

WESBANCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Six Months Ended June 30,
*(unaudited, in thousands)*	2011			2010

NET CASH PROVIDED BY OPERATING ACTIVITIES	$	58,738		$	49,510
INVESTING ACTIVITIES:
Net decrease in loans		9,729			50,143
Securities available-for-sale:
Proceeds from sales		-			103,463
Proceeds from maturities, prepayments and calls		171,140			184,147
Purchases of securities		(150,954	)		(281,739	)
Securities held-to-maturity:
Proceeds from maturities, prepayments and calls		42,039			7,984
Purchases of securities		(161,448	)		(10,524	)
Purchases of premises and equipment – net		(1,349	)		(883	)
Net cash (used in) provided by investing activities		(90,843	)		52,591
FINANCING ACTIVITIES:
Net increase in deposits		48,970			139,767
Proceeds from Federal Home Loan Bank borrowings		-			20,000
Repayment of Federal Home Loan Bank borrowings		(26,518	)		(206,099	)
Increase (decrease) in other short-term borrowings		6,547			(5,877	)
Increase (decrease) in federal funds purchased		15,000			(5,000	)
Dividends paid to common shareholders		(7,711	)		(7,439	)
Treasury shares sold – net		26			30
Net cash provided by (used in) financing activities		36,314			(64,618	)
Net increase in cash and cash equivalents		4,209			37,483
Cash and cash equivalents at beginning of the period		79,136			82,867
Cash and cash equivalents at end of the period	$	83,345		$	120,350
SUPPLEMENTAL DISCLOSURES:
Interest paid on deposits and other borrowings	$	29,263		$	40,704
Income taxes paid		5,850			2,850
Transfers of loans to other real estate owned		1,004			2,321
Transfer to loans held for sale		-			791
Transfers of available-for-sale securities to held-to-maturity securities at fair value		-			426,723

See Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION— The accompanying unaudited interim financial statements of WesBanco, Inc. (“WesBanco”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010.

WesBanco’s interim financial statements have been prepared following the significant accounting policies disclosed in Note 1 of the Notes to the Consolidated Financial Statements of its 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission. In the opinion of management, the accompanying interim financial information reflects all adjustments, including normal recurring adjustments, necessary to present fairly WesBanco’s financial position and results of operations for each of the interim periods presented. Results of operations for interim periods are not necessarily indicative of the results of operations that may be expected for a full year.

RECENT ACCOUNTING PRONOUNCEMENTS— In June 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement that requires all non-owner changes in stockholders’ equity to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The pronouncement should be applied retrospectively effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s consolidated financial statements.

In May 2011, the FASB issued an accounting pronouncement which amends the fair value measurement and disclosure requirements to achieve common disclosure requirements between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The accounting pronouncement requires certain disclosures about transfers between level 1 and level 2 of the fair value hierarchy, sensitivity of fair value measurements categorized within Level 3 of the fair value hierarchy, and categorization by level of items that are reported at cost but are required to be disclosed at fair value. The disclosures are to be applied prospectively effective in the first interim and annual periods beginning after December 15, 2011. The adoption of this pronouncement is not expected to have a material impact on WesBanco’s consolidated financial statements.

In April 2011, the FASB issued an accounting pronouncement which clarifies when a loan modification or restructuring is considered a troubled debt restructuring. The guidance is effective for the first interim period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. For purposes of measuring impairment on newly-considered impaired receivables an entity should apply the guidance prospectively. The disclosures relating to troubled debt restructurings will be required to be included in WesBanco’s third quarter Form 10-Q. While the provisions of this pronouncement may increase the amount of WesBanco’s receivables that are considered troubled debt restructurings and will expand the related disclosures on troubled debt restructurings, it is not expected to have a material impact on WesBanco’s financial condition and results of operations.

NOTE 2. EARNINGS PER COMMON SHARE

Earnings per common share are calculated as follows:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
*(unaudited, in thousands, except shares and per share amounts)*	2011		2010		2011		2010

Numerator for both basic and diluted earnings per common share:
Net income	$	11,918	$	8,238	$	22,159	$	16,149

Denominator:
Total average basic common shares outstanding		26,610,450		26,577,065		26,599,791		26,572,385
Effect of dilutive stock options		959		763		1,297		530
Total diluted average common shares outstanding		26,611,409		26,577,828		26,601,088		26,572,915

Earnings per common share - basic	$	0.45	$	0.31	$	0.83	$	0.61
Earnings per common share - diluted	$	0.45	$	0.31	$	0.83	$	0.61

NOTE 3. SECURITIES

The following table presents the fair value and amortized cost of available-for-sale and held-to-maturity securities:


	June 30, 2011									December 31, 2010
			Gross		Gross			Estimated				Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
*(unaudited, in thousands)*	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value

Available-for-sale
Other government agencies	$	330,833	$	988	$	(2,824	)	$	328,997	$	367,150	$	1,436	$	(5,451	)	$	363,135
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies		365,233		8,200		(750	)		372,683		344,787		9,412		(854	)		353,345
Obligations of state and political subdivisions		195,629		5,410		(344	)		200,695		208,198		4,321		(1,711	)		210,808
Corporate debt securities		31,362		27		(346	)		31,043		25,775		12		(204	)		25,583
Total debt securities	$	923,057	$	14,625	$	(4,264	)	$	933,418	$	945,910	$	15,181	$	(8,220	)	$	952,871
Equity securities		4,244		703		(23	)		4,924		3,787		823		-			4,610
Total available-for-sale securities	$	927,301	$	15,328	$	(4,287	)	$	938,342	$	949,697	$	16,004	$	(8,220	)	$	957,481
Held-to-maturity
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies	$	296,082	$	4,746	$	(58	)	$	300,770	$	202,062	$	1,721	$	(14	)	$	203,769
Other residential collateralized mortgage obligations		962		11		-			973		1,224		14		-			1,238
Obligations of state and political subdivisions		287,857		5,800		(589	)		293,068		263,973		973		(5,592	)		259,354
Corporate debt securities		1,452		78		-			1,530		1,451		90		-			1,541
Total held-to-maturity securities	$	586,353	$	10,635	$	(647	)	$	596,341	$	468,710	$	2,798	$	(5,606	)	$	465,902
Total securities	$	1,513,654	$	25,963	$	(4,934	)	$	1,534,683	$	1,418,407	$	18,802	$	(13,826	)	$	1,423,383

At June 30, 2011, and December 31, 2010, there were no holdings of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of WesBanco’s shareholders’ equity.

The following table presents the fair value of available-for-sale and held-to-maturity securities by contractual maturity at June 30, 2011. In some instances, the issuers may have the right to call or prepay obligations without penalty prior to the contractual maturity date.

June 30, 2011

(unaudited, in thousands)

Within One Year

After One But
Within Five Years

After Five But
Within Ten Years

After Ten Years

Total

Available-for-sale

Other government agencies

3,059

26,820

88,047

211,071

328,997

Residential mortgage-backed securities and collateralized mortgage obligations of government agencies ⁽¹⁾

16,593

300,171

49,456

6,463

372,683

Obligations of states and political subdivisions

5,364

49,353

99,850

46,128

200,695

Corporate debt securities

3,426

23,868

1,939

1,810

31,043

Equity securities

4,924

Total available-for-sale securities

28,442

400,212

239,292

270,396

938,342

Held-to-maturity⁽²⁾

Residential mortgage-backed securities and collateralized mortgage obligations of government agencies ⁽¹⁾

3,993

240,280

10,363

46,134

300,770

Other residential collateralized mortgage obligations ⁽¹⁾

973

Obligations of states and political subdivisions

4,877

8,845

28,795

250,551

293,068

Corporate debt securities

1,530

Total held-to-maturity securities

8,870

250,098

39,158

298,215

596,341

Total securities

37,312

650,310

278,450

568,611

1,534,683

⁽¹⁾Mortgage-backed and collateralized mortgage securities, which have prepayment provisions, are assigned to maturity categories based on current estimated average lives.

⁽²⁾The held-to-maturity portfolio is carried at an amortized cost of $586.4 million.

Securities with aggregate par values of $658.7 million and $621.4 million at June 30, 2011 and December 31, 2010, respectively, were pledged as security for public and trust funds, and securities sold under agreements to repurchase. Proceeds from the sale of available-for-sale securities were $103.5 million for the six months ended June 30, 2010. There were no sales from the portfolio for the six months ended June 30, 2011. Net unrealized security gains on the available-for-sale portfolio were $11.0 million and $7.8 million for June 30, 2011 and December 31, 2010. These unrealized gains were recognized in other comprehensive income, net of tax. For the six months ended June 30, 2011, gross realized security gains and losses were immaterial. For the six months ended June 30, 2010, gross realized security gains on available-for-sale securities were $2.3 million and gross realized security losses were immaterial.

The following table provides information on unrealized losses on investment securities that have been in an unrealized loss position for less than twelve months and twelve months or more as of June 30, 2011 and December 31, 2010:


	June 30, 2011
	Less than 12 months							12 months or more							Total
*(unaudited, dollars in thousands)*	Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities

Other government agencies	$	159,102	$	(2,824	)		19	$	-	$	-			-	$	159,102	$	(2,824	)		19
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies		129,316		(776	)		22		1,982		(32	)		4		131,298		(808	)		26
Obligations of states and political subdivisions		74,093		(911	)		84		1,407		(22	)		3		75,500		(933	)		87
Corporate debt securities		23,921		(346	)		10		-		-			-		23,921		(346	)		10
Equity securities		86		(23	)		3		-		-			-		86		(23	)		3
Total temporarily impaired securities	$	386,518	$	(4,880	)		138	$	3,389	$	(54	)		7	$	389,907	$	(4,934	)		145

	December 31, 2010
	Less than 12 months							12 months or more							Total
*(unaudited, dollars in thousands)*	Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities		Fair Value		Unrealized Losses			# of Securities

Other government agencies	$	190,252	$	(5,451	)		21	$	-	$	-			-	$	190,252	$	(5,451	)		21
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies		97,174		(855	)		20		578		(13	)		1		97,752		(868	)		21
Obligations of states and political subdivisions		223,324		(7,290	)		255		342		(13	)		2		223,666		(7,303	)		257
Corporate debt securities		20,033		(204	)		8		-		-			-		20,033		(204	)		8
Total temporarily impaired securities	$	530,783	$	(13,800	)		304	$	920	$	(26	)		3	$	531,703	$	(13,826	)		307

Unrealized losses in the table represent temporary fluctuations resulting from changes in market rates in relation to fixed yields. Unrealized losses in the available-for-sale portfolio are accounted for as an adjustment to other comprehensive income in shareholders’ equity.

WesBanco does not believe the securities presented above are impaired due to reasons of credit quality, as substantially all debt securities are of investment grade quality and all are paying principal and interest according to their contractual terms. WesBanco does not intend to sell, nor is it more likely than not that it will be required to sell, loss position securities prior to recovery of their cost, and therefore, management believes the unrealized losses detailed above are temporary and no impairment loss relating to these securities has been recognized.

Securities that do not have readily determinable fair values and for which WesBanco does not exercise significant influence are carried at cost. Cost method investments consist primarily of Federal Home Loan Bank (“FHLB”) stock totaling $24.5 million and $28.0 million at June 30, 2011 and December 31, 2010, respectively, and are included in other assets in the Consolidated Balance Sheets. Cost-method investments are evaluated for impairment whenever events or circumstances suggest that their carrying value may not be recoverable.

In 2008 the FHLB of Pittsburgh announced that it would suspend dividends and the repurchase of excess capital stock from its member banks until further notice. However, the FHLB of Pittsburgh announced on October 28, 2010 that the suspension on the repurchase of excess capital stock would be partially lifted, and future excess capital stock repurchases would be reviewed on a quarter-to-quarter basis. The suspension of dividends was not affected by the announcement. The FHLB of Pittsburgh stock owned by WesBanco totaling $22.6 million and $25.0 million at June 30, 2011 and December 31, 2010, respectively, does not have a readily determinable fair value and is recorded as a cost method investment in other assets on the Consolidated Balance Sheet, and is held primarily to serve as collateral on FHLB borrowings. Although the FHLB of Pittsburgh has suspended dividends and only partially lifted the suspension on the repurchase of excess capital stock, they are meeting their current debt obligations, have continued to exceed all required capital ratios, and have remained in compliance with statutory and regulatory requirements. Accordingly, as of June 30, 2011, WesBanco believes that sufficient evidence exists to conclude that its investment in FHLB stock was not impaired. At June 30, 2011, WesBanco held excess capital stock of $5.6 million that remains to be repurchased by the FHLB of Pittsburgh. The FHLB of Pittsburgh stock balance declined from December 31, 2010 to June 30, 2011 due to stock repurchases during the period.

NOTE 4. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES

The recorded investment in loans is presented in the Consolidated Balance Sheets net of deferred loan fees and costs of $2.8 million at June 30, 2011 and $3.1 million at December 31, 2010.

The following table summarizes changes in the allowance for credit losses applicable to each category of the loan portfolio.

For the Six Months Ended

June 30,

2011

2010

(unaudited, in thousands)

Commercial
Real Estate -
Land and
Construction

Commercial
Real Estate -
Other

Commercial
& Industrial

Residential
Real Estate

Home
Equity

Consumer

Deposit
Overdraft

Total

Total

Balance at beginning of year:

Allowance for loan losses

4,701

30,836

10,793

5,950

2,073

5,641

1,057

61,051

61,160

Allowance for loan commitments

1,037

285

1,404

195

Total beginning allowance for credit losses

5,738

31,121

10,858

5,951

2,087

5,643

1,057

62,455

61,355

Provision for credit losses:

Provision for loan losses

4,893

3,196

4,138

1,386

421

930

578

15,542

23,175

Provision for loan commitments

(696

)

(275

)

235

(699

)

Total provision for credit losses

4,197

2,921

4,373

1,387

445

942

578

14,843

23,175

Charge-offs

(4,532

)

(4,156

)

(3,937

)

(1,992

)

(448

)

(1,840

)

(420

)

(17,325

)

(20,429

)

Recoveries

725

330

248

635

170

2,150

1,297

Net charge-offs

(4,499

)

(3,431

)

(3,607

)

(1,744

)

(439

)

(1,205

)

(250

)

(15,175

)

(19,132

)

Balance at end of period:

Allowance for loan losses

5,095

30,601

11,324

5,592

2,055

5,366

1,385

61,418

65,203

Allowance for loan commitments

341

300

705

195

Total ending allowance for credit losses

5,436

30,611

11,624

5,594

2,093

5,380

1,385

62,123

65,398

The following tables present the allowance for credit losses and recorded investments in loans by category:

Allowance for Credit Losses and Recorded Investment in Loans

June 30, 2011

(unaudited, in thousands)

Commercial
Real Estate-
Land and
Construction

Commercial
Real Estate-
Other

Commercial
and
Industrial

Residential
Real

Estate

Home

Equity

Consumer

Over-
draft

Total

Allowance for credit losses:

Allowance for loans individually evaluated for impairment

1,312

7,556

920

9,788

Allowance for loans collectively evaluated for impairment

3,783

23,045

10,404

5,592

2,055

5,366

1,385

51,630

Allowance for loan commitments

341

300

705

Total allowance for credit losses

5,436

30,611

11,624

5,594

2,093

5,380

1,385

62,123

Portfolio loans:

Individually evaluated for impairment

11,801

43,716

5,800

61,317

Collectively evaluated for impairment

161,571

1,516,665

423,362

598,720

250,678

250,733

3,201,729

Total portfolio loans

173,372

1,560,381

429,162

598,720

250,678

250,733

3,263,046

Allowance for Credit Losses and Recorded Investment in Loans

December 31, 2010

(unaudited, in thousands)

Commercial
Real Estate-
Land and
Construction

Commercial
Real Estate-
Other

Commercial
and
Industrial

Residential
Real

Estate

Home

Equity

Consumer

Over-
draft

Total

Allowance for credit losses:

Allowance for loans individually evaluated for impairment

3,716

5,663

1,051

10,430

Allowance for loans collectively evaluated for impairment

985

25,173

9,742

5,950

2,073

5,641

1,057

50,621

Allowance for loan commitments

1,037

285

1,404

Total allowance for credit losses

5,738

31,121

10,858

5,951

2,087

5,643

1,057

62,455

Portfolio loans:

Individually evaluated for impairment

11,976

56,976

7,406

76,358

Collectively evaluated for impairment

142,865

1,545,432

405,320

608,693

249,423

260,585

3,212,318

Total portfolio loans

154,841

1,602,408

412,726

608,693

249,423

260,585

3,288,676

WesBanco maintains an internal loan grading system to reflect the credit quality of commercial loans. Commercial loan risk grades are determined based on an evaluation of the relevant characteristics of each loan, assigned at the inception of each loan and adjusted thereafter at any time to reflect changes in the risk profile throughout the life of each loan. The primary factors used to determine the risk grade are the reliability and sustainability of the primary source of repayment and overall financial strength of the borrower. This includes an analysis of cash flow available to repay debt, profitability, liquidity, leverage, and overall financial trends. Other factors include management, industry or property type risks, an assessment of secondary sources of repayment such as collateral or guarantees, other terms and conditions of the loan that may increase or reduce its risk, and economic conditions and other external factors that may influence repayment capacity and financial condition.

Commercial real estate consists of loans to purchase, construct or refinance owner-occupied and investment properties. Factors that are considered in assigning the risk grade vary depending on the type of property financed. The risk grade assigned to construction and development loans is based on the overall viability of the project, the experience and financial capacity of the developer or builder to successfully complete the project, project specific and market absorption rates and comparable property values, and the amount of pre-sales for residential housing construction or pre-leases for commercial investment property. The risk grade assigned to commercial investment property loans is based primarily on the adequacy of net rental income generated by the property to service the debt, the type, quality, industry and mix of tenants, and the terms of leases, but also considers the overall financial capacity of the investors and their experience in owning and managing investment property. The risk grade assigned to owner-occupied commercial real estate and commercial and industrial loans is based primarily on historical and projected earnings, the adequacy of operating cash flow to service all of the business’s debt, and the capital resources, liquidity and leverage of the business, but also considers the industry in which the business operates, the business’s specific competitive advantages or disadvantages, the quality and experience of management, and external influences on the business such as economic conditions. Other factors that are considered for commercial and industrial loans include the type, quality and marketability of non-real estate collateral and whether the structure of the loan increases or reduces its risk. The type, age, condition, location and any environmental risks associated with a property are also considered for all types of commercial real estate. The overall financial condition and repayment capacity of any guarantors is also evaluated to determine the extent to which they mitigate other risks of the loan. The following descriptions of risk grades apply to commercial real estate and commercial and industrial loans.

Excellent or minimal risk loans are fully secured by liquid or readily marketable collateral and therefore have virtually no risk of loss. Good or desirable risk loans are extended in the normal course of business to creditworthy borrowers that exhibit a history of positive financial results that are at least comparable to the average for their industry or type of real estate. These loans are expected to perform satisfactorily during most economic cycles and there are no significant external factors that are expected to adversely affect these borrowers more than others in the same industry. Any minor unfavorable characteristics of these loans are outweighed or mitigated by strong positive factors including but not limited to adequate secondary sources of repayment or guarantees.

Fair or acceptable risk loans have a somewhat higher credit risk profile due to specific weaknesses or uncertainties that could adversely impact repayment capacity. Loans in this category generally warrant additional attention or monitoring, or a more rigid loan structure. These loans represent the maximum level of risk accepted in the normal course of lending. Specific issues that may warrant this grade include financial results that are less favorable than the average for the borrower’s industry or type of real estate, cyclical financial results, loans based on projections that have a reasonable probability of being achieved, start-up businesses, construction projects, and other external factors that indicate a higher level of credit risk. Loans that are underwritten primarily on the basis of the repayment capacity or financial condition of guarantors may also be assigned this grade.

Criticized and classified loans are equivalent to the classifications used by banking regulators. Criticized or marginal loans are currently protected but have weaknesses, which if not corrected, may inadequately protect the Bank at some future date. These loans represent an unwarranted credit risk and would generally not be extended in the normal course of lending. Specific issues which may warrant this grade include declining financial results, increased reliance on secondary sources of repayment or guarantor support and adverse external influences that may negatively impact the business or property.

Substandard loans are inadequately protected by the current repayment capacity and equity of the borrower or collateral pledged, if any. Substandard loans have one or more well-defined weaknesses that jeopardize their repayment or collection in full. These loans may or may not be reported as nonaccrual. Doubtful loans have all the weaknesses inherent to a substandard loan with the added characteristic that full repayment is highly questionable or improbable on the basis of currently existing facts, conditions and collateral values. However, recognition of loss may be deferred if there are reasonably specific pending factors that will reduce the risk if they occur.

The following tables summarize commercial loans by their assigned risk grade:

Commercial Loans by Internally Assigned Risk Grade

As of June 30, 2011

(unaudited, in thousands)

Commercial

Real Estate-

Land and

Construction

Commercial

Real Estate-
Other

Commercial
& Industrial

Total
Commercial
Loans

Excellent - minimal risk

847

239

52,832

53,918

Good - desirable risk

37,247

568,310

177,690

783,247

Fair - acceptable risk

93,568

764,697

161,740

1,020,005

Criticized - marginal

21,018

134,973

13,171

169,162

Classified - substandard

20,692

92,162

23,729

136,583

Classified - doubtful

Total

173,372

1,560,381

429,162

2,162,915


	Commercial Loans by Internally Assigned Risk Grade As of December 31, 2010
*(unaudited, in thousands)*	Commercial Real Estate- Land and Construction		Commercial Real Estate- Other		Commercial & Industrial		Total Commercial Loans

Excellent - minimal risk	$	559	$	170	$	55,203	$	55,932
Good - desirable risk		28,592		597,484		168,574		794,650
Fair - acceptable risk		75,446		776,115		147,616		999,177
Criticized - marginal		26,411		136,677		16,817		179,905
Classified - substandard		23,833		91,962		24,516		140,311
Classified - doubtful		-		-		-		-
Total	$	154,841	$	1,602,408	$	412,726	$	2,169,975

Residential real estate, home equity and consumer loans are not assigned internal risk grades other than as required by regulatory guidelines that are based primarily on the age of past due loans. The aggregate amount of residential real estate, home equity and consumer loans classified as substandard in accordance with regulatory guidelines and accruing were $6.0 million at June 30, 2011 and $6.6 million at December 31, 2010, with non-accrual loans representing $12.1 million and $11.7 million, for each period respectively.

The following table summarizes the age analysis of all categories of loans. Nonaccrual, troubled debt restructurings and other impaired loans which are also set forth separately in this footnote are included in the following table according to their payment status, some of which are current as to payment status.

Age Analysis of Loans

As of June 30, 2011

(unaudited, in thousands)

Current

30-59 Days
Past Due

60-89 Days
Past Due

90 Days
or More
Past Due

Total
Past Due

Total

Loans

90 Days
or More
Past Due
and Accruing

Commercial real estate:

Land and construction

163,524

489

290

9,069

9,848

173,372

Other

1,533,032

6,420

2,631

18,298

27,349

1,560,381

443

Total commercial real estate

1,696,556

6,909

2,921

27,367

37,197

1,733,753

443

Commercial and industrial

417,909

1,045

646

9,562

11,253

429,162

310

Residential real estate

577,698

2,721

5,931

12,370

21,022

598,720

4,313

Home equity

246,905

1,517

649

1,607

3,773

250,678

681

Consumer

245,298

3,689

632

1,114

5,435

250,733

985

Total portfolio loans

3,184,366

15,881

10,779

52,020

78,680

3,263,046

6,732

Loans held for sale

4,205

Total loans

3,188,571

15,881

10,779

52,020

78,680

3,267,251

6,732


	Age Analysis of Loans As of December 31, 2010
*(unaudited, in thousands)*	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans		90 Days or More Past Due and Accruing

Commercial real estate:

Land and construction	$	150,190	$	429	$	311	$	3,911	$	4,651	$	154,841	$	277
Other		1,579,400		4,365		2,956		15,687		23,008		1,602,408		692
Total commercial real estate		1,729,590		4,794		3,267		19,598		27,659		1,757,249		969
Commercial and industrial		401,400		3,530		1,370		6,426		11,326		412,726		95
Residential real estate		588,212		2,084		5,704		12,693		20,481		608,693		4,535
Home equity		245,471		1,665		633		1,654		3,952		249,423		1,126
Consumer		253,407		4,898		1,122		1,158		7,178		260,585		958
Total portfolio loans		3,218,080		16,971		12,096		41,529		70,596		3,288,676		7,683
Loans held for sale		10,800		-		-		-		-		10,800		-
Total loans	$	3,228,880	$	16,971	$	12,096	$	41,529	$	70,596	$	3,299,476	$	7,683

Impaired Loans — Impaired loans consist of nonaccrual loans, troubled debt restructurings and other impaired loans.

Loans are generally placed on non-accrual status when they become past due 90 days or more unless they are both well-secured and in the process of collection.

Loans are categorized as troubled debt restructurings when WesBanco, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Concessions that may be granted include a reduction of the interest rate below the current market interest rate, the amount of accrued interest, the principal amount of the loan or an extension of the maturity date of the loan. These loans generally remain on accrual status as long as they continue to perform in accordance with their modified terms. Loans may be removed from troubled debt restructuring status after they have performed according to the restructured terms for a period of time if the interest rate under the modified terms is at or above market, or they may move to non-accrual if they do not perform in accordance with the loans’ modified terms.

Other impaired loans consist of certain impaired loans that are internally classified as substandard or doubtful that have not been placed on non-accrual or considered a troubled debt restructuring but are not fully secured by the value of the collateral or the observable market price for the loan is less than its outstanding balance. Other impaired loans may include loans for which a specific reserve is established and acquired loans for which a credit valuation adjustment was recorded at the time of acquisition. Other impaired loans exhibit some adverse credit characteristics but continue to accrue interest because they are generally paying current.

The following tables summarize impaired loans:

Impaired Loans (1)

For the Six Months Ended June 30, 2011

Unpaid

Average

Interest

Principal

Recorded

Related

Recorded

Income

(unaudited, in thousands)

Balance (2)

Investment

Allowance

Investment

Recognized

With no related allowance recorded:

Commercial real estate:

Land and construction

18,381

12,740

10,553

117

Other

38,190

34,130

33,396

328

Commercial and industrial

11,485

8,920

8,630

Residential real estate

14,899

13,443

14,184

Home equity

1,299

1,150

1,007

Consumer

205

181

240

Total impaired loans without a related allowance

84,459

70,564

68,010

613

With an allowance recorded:

Commercial real estate:

Land and construction

4,156

848

7,106

Other

24,099

8,019

26,498

513

Commercial and industrial

1,840

920

3,959

Total impaired loans with an allowance

30,095

9,787

37,563

595

Total impaired loans

114,554

100,659

9,787

105,573

1,208

(1)

Total impaired loans as of June 30, 2011 include non-accrual loans of $62.0 million, troubled debt restructurings of $36.4 million and other impaired loans of $2.2 million.

(2)

The difference between the unpaid principal balance and the recorded investment generally reflects amounts that have been previously charged-off.


	Impaired Loans (1)
	For the Year Ended December 31, 2010
*(unaudited, in thousands)*	Unpaid Principal Balance (2)		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized

With no related allowance recorded:
Commercial real estate:
Land and construction	$	8,467	$	7,047	$	-	$	4,605	$	203
Other		34,270		31,571		-		31,865		918
Commercial and industrial		8,935		8,006		-		9,313		159
Residential real estate		15,260		14,131		-		16,523		286
Home equity		855		755		-		938		5
Consumer		336		302		-		358		9
Total impaired loans without a related allowance		68,123		61,812		-		63,602		1,580
With an allowance recorded:
Commercial real estate:
Land and construction		11,976		11,976		3,716		13,305		407
Other		32,308		32,308		5,663		29,107		1,667
Commercial and industrial		4,106		4,106		1,051		3,273		296
Total impaired loans with an allowance		48,390		48,390		10,430		45,685		2,370
Total impaired loans	$	116,513	$	110,202	$	10,430	$	109,287	$	3,950

(1)

Total impaired loans as of December 31, 2010 include non-accrual loans of $48.8 million, troubled debt restructurings of $47.5 million and other impaired loans of $13.9 million.

(2)

The difference between the unpaid principal balance and the recorded investment generally reflects amounts that have been previously charged-off.

The following tables present the recorded investment in troubled debt restructurings and non-accrual loans:


	Troubled Debt Restructurings
*(unaudited, in thousands)*	June 30, 2011		December 31, 2010

Commercial real estate:
Land and construction	$	5,491	$	10,764
Other		27,943		33,122
Total commercial real estate		33,434		43,886
Commercial and industrial		336		73
Residential real estate		2,614		3,443
Home equity		-		-
Consumer		53		81
Total	$	36,437	$	47,483

	Non-accrual Loans
*(unaudited, in thousands)*	June 30, 2011		December 31, 2010

Commercial real estate:
Land and construction	$	11,404	$	4,391
Other		28,105		24,833
Total commercial real estate		39,509		29,224
Commercial and industrial		10,424		7,933
Residential real estate		10,829		10,688
Home equity		1,150		755
Consumer		129		220
Total	$	62,041	$	48,820

WesBanco had unfunded commitments to debtors whose loans were classified as impaired of $0.3 million and $1.4 million at June 30, 2011 and December 31, 2010, respectively.

The following table summarizes other real estate owned and repossessed assets included in other assets:


	June 30,		December 31,
*(unaudited, in thousands)*	2011		2010

Other real estate owned	$	4,781	$	7,724
Repossessed assets		231		345
Total other real estate owned and repossessed assets	$	5,012	$	8,069

NOTE 5. FEDERAL HOME LOAN BANK BORROWINGS

WesBanco is a member of the FHLB System. WesBanco’s FHLB borrowings, which consist of borrowings from both the FHLB of Pittsburgh and the FHLB of Cincinnati, are secured by a blanket lien by the FHLB on certain residential mortgage and other loan types or securities with a market value in excess of the outstanding balances of the borrowings. At June 30, 2011 and December 31, 2010 WesBanco had FHLB borrowings of $226.9 million and $253.6 million, respectively, with a weighted-average interest rate of 3.64% for both periods. The decline in borrowings from December 31, 2010 was due to scheduled maturities. The terms of the security agreement with the FHLB include a specific assignment of collateral that requires the maintenance of qualifying mortgage and other types of loans as pledged collateral with unpaid principal amounts in excess of the FHLB advances, when discounted at certain pre-established percentages of the loans’ unpaid principal balances. FHLB stock owned by WesBanco totaling $24.5 million at June 30, 2011 and $28.0 million at December 31, 2010 is also pledged as collateral on these advances. The remaining maximum borrowing capacity by WesBanco with the FHLB at June 30, 2011 and December 31, 2010 was estimated to be approximately $960.9 million and $1.0 billion, respectively.

Certain FHLB advances contain call features, which allow the FHLB to call the outstanding balance or convert a fixed rate borrowing to a variable rate advance if the strike rate goes beyond a certain predetermined rate. The probability that these advances will be called depends primarily on the level of related interest rates during the call period. Of the $226.9 million outstanding at June 30, 2011, $106.1 million in FHLB convertible advances are subject to call or conversion to a variable rate advance by the FHLB.

The following table presents the aggregate annual maturities and weighted-average interest rates of FHLB borrowings at June 30, 2011 based on their contractual maturity dates and effective interest rates:


*(unaudited, dollars in thousands)*	Scheduled		Weighted
Year	Maturity		Average Rate

2011	$	58,052		3.79%
2012		76,562		3.64%
2013		50,416		3.28%
2014		16,228		3.40%
2015		937		4.69%
2016 and thereafter		24,702		4.10%
Total	$	226,897		3.64%

NOTE 6. PENSION PLAN

The following table presents the net periodic pension cost for WesBanco’s Defined Benefit Pension Plan (the “Plan”) and the related components:


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
*(unaudited, in thousands)*	2011			2010			2011			2010

Service cost – benefits earned during year	$	643		$	581		$	1,279		$	1,155
Interest cost on projected benefit obligation		907			877			1,803			1,744
Expected return on plan assets		(1,412	)		(1,197	)		(2,808	)		(2,381	)
Amortization of prior service cost		15			(29	)		29			(58	)
Amortization of net loss		318			302			633			602
Net periodic pension cost	$	471		$	534		$	936		$	1,062

The Plan covers all employees of WesBanco and its subsidiaries who were hired on or before August 1, 2007 who satisfy minimum age and length of service requirements, and is not available to employees hired after such date.

A minimum required contribution of $2.6 million is due for 2011 which will be funded by the Plan’s available credit balance. No decision has been made as of June 30, 2011 relative to the level of contribution in excess of the required minimum that will be made to the Plan, if any.

NOTE 7. FAIR VALUE MEASUREMENTS

Certain assets and liabilities are measured at fair value on a recurring or nonrecurring basis. The following is a discussion of these assets and liabilities and valuation techniques applied to each for fair value measurement:

Securities: The fair value of securities available-for-sale which are measured on a recurring basis are determined primarily by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other similar securities. These securities are classified within level 1 or 2 of the fair value hierarchy. Positions that are not traded in active markets for which valuations are generated using assumptions not observable in the market or management’s best estimate are classified within level 3 of the fair value hierarchy. This includes certain specific municipal debt issues.

Mortgage servicing rights: The fair value of mortgage servicing rights is based on an independent valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates assumptions based on management’s best judgment that are significant inputs to the discounting calculations. If the carrying value exceeds fair value, they are considered impaired and are classified within level 3 of the fair value hierarchy as a result.

Impaired loans: Impaired loans are carried at the lower of cost or the fair value of the collateral for collateral-dependent loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The use of discounted cash flow models and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and impaired loans are therefore classified within level 3 of the fair value hierarchy.

Other real estate owned and repossessed assets: Other real estate owned and repossessed assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs. The use of management’s best judgment is a significant input in arriving at the fair value measure of the underlying collateral and therefore other real estate owned and repossessed assets are classified within level 3 of the fair value hierarchy.

Loans held for sale: Loans held for sale are carried, in aggregate, at the lower of cost or fair value. The use of a valuation model and management’s best judgment are significant inputs in arriving at the fair value and therefore loans held for sale are classified within level 3 of the fair value hierarchy.

The following tables set forth WesBanco’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy:


			June 30, 2011 Fair Value Measurements Using:
*(unaudited, in thousands)*	Asset at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Securities - available-for-sale
Other government agencies	$	328,997	$	-	$	328,997	$	-
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies		372,683		-		372,683		-
Obligations of state and political subdivisions		200,695		-		200,649		46
Corporate debt securities		31,043		-		31,043		-
Equity securities		4,924		3,274		1,650		-
Total securities - available-for-sale	$	938,342	$	3,274	$	935,022	$	46

The Company’s policy is to recognize transfers between levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between levels 1 and 2 for the six months ended June 30, 2011.


			December 31, 2010 Fair Value Measurements Using:
*(unaudited, in thousands)*	Asset at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Securities - available-for-sale
Other government agencies	$	363,135	$	-	$	363,135	$	-
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies		353,345		-		353,345		-
Obligations of state and political subdivisions		210,808		-		210,740		68
Corporate debt securities		25,583		-		25,583		-
Equity securities		4,610		2,884		1,726		-
Total securities - available-for-sale	$	957,481	$	2,884	$	954,529	$	68

The following table presents additional information about assets measured at fair value on a recurring basis and for which WesBanco has utilized level 3 inputs to determine fair value:


(unaudited, in thousands)	Other residential collateralized mortgage obligations			Obligations of state and political subdivisions			Equity securities		Total

For the Three Months ended June 30, 2011:
Beginning balance	$	-		$	46		$	-	$	46
Total gains and losses included in other comprehensive income		-			-			-		-
Settlements		-			-			-		-
Ending balance	$	-		$	46		$	-	$	46
For the Three Months ended June 30, 2010:
Beginning balance	$	23		$	1,352		$	242	$	1,617
Transfers out of Level 3		(19	)		(815	)		-		(834	)
Total gains and losses included in other comprehensive income		-			(14	)		-		(14	)
Settlements		(4	)		(306	)		-		(310	)
Ending balance	$	-		$	217		$	242	$	459
For the Six Months ended June 30, 2011:
Beginning balance	$	-		$	68		$	-	$	68
Total gains and losses included in other comprehensive income		-			-			-		-
Settlements		-			(22	)		-		(22	)
Ending balance	$	-		$	46		$	-	$	46

For the Six Months ended June 30, 2010:
Beginning balance	$	33		$	1,401		$	242	$	1,676
Transfers out of Level 3		(19	)		(815	)		-		(834	)
Total gains and losses included in other comprehensive income		3			(3	)		-		-
Settlements		(17	)		(366	)		-		(383	)
Ending balance	$	-		$	217		$	242	$	459

We may be required from time to time to measure certain assets at fair value on a nonrecurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis, the following table provides the level of valuation assumptions used to determine each adjustment in the carrying value of the related individual assets or portfolios:


			Fair Value Measurements Using:
*(unaudited, in thousands)*	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

June 30, 2011
Impaired loans (1)	$	20,308	$	-	$	-	$	20,308
Other real estate owned and repossessed assets (2)		5,012		-		-		5,012
Mortgage servicing rights (3)		1,510		-		-		1,510
Loans held for sale (4)		4,205		-		-		4,205

December 31, 2010
Impaired loans (1)	$	37,960		-		-	$	37,960
Other real estate owned and repossessed assets (2)		8,069		-		-		8,069
Mortgage servicing rights (3)		1,675		-		-		1,675
Loans held for sale (4)		10,800		-		-		10,800

(1)

Represents the carrying value of loans for which adjustments are based on the appraised value and management’s judgment of the value of collateral.

(2)

Other real estate owned and repossessed assets are carried at the lower of the investment in the assets or the fair value of the assets less estimated selling costs.

(3)

Represents the carrying value of mortgage servicing rights whose value has been impaired and therefore carried at fair value as determined from independent valuations.

(4)

Loans held for sale are carried, in aggregate, at the lower of cost or fair value.

NOTE 8. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates of financial instruments are based on the present value of expected future cash flows, quoted market prices of similar financial instruments, if available, and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, fair value estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.

Fair value is determined at one point in time and is not representative of future value. These amounts do not reflect the total value of a going concern organization. Management does not have the intention to dispose of a significant portion of its financial instruments and, therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.

The following table represents the estimates of fair value of financial instruments:

June 30,

2011

December 31,

2010

(unaudited, in thousands)

Carrying
Amount

Fair

Value

Carrying
Amount

Fair

Value

Financial assets:

Cash and due from banks

83,345

79,136

Securities available-for-sale

938,342

957,481

Securities held-to-maturity

586,353

596,341

468,710

465,902

Net loans

3,201,628

3,073,255

3,227,625

3,070,061

Loans held for sale

4,205

10,800

Accrued interest receivable

20,683

20,536

Bank owned life insurance

108,296

106,502

Financial liabilities:

Deposits

4,221,339

4,241,321

4,172,423

4,201,934

Federal Home Loan Bank borrowings

226,897

232,031

253,606

263,983

Other borrowings

208,704

210,649

187,385

189,094

Junior subordinated debt

106,050

66,161

106,034

55,397

Accrued interest payable

5,906

6,559

The following methods and assumptions were used to estimate the fair value of financial instruments:

Cash and due from banks — The carrying amount for cash and due from banks is a reasonable estimate of fair value.

Securities — Fair values for securities are based on quoted market prices, if available. If market prices are not available, then quoted market prices of similar instruments are used. If quoted prices of similar instruments are not available, the fair value is generated from model-based techniques using assumptions not observable in the market.

Net loans — Fair values for loans are estimated using a discounted cash flow methodology. The discount rates take into account interest rates currently being offered to customers for loans with similar terms, the credit risk associated with the loan and market factors, including liquidity. In the current market environment for loans, investors are generally requiring a much higher rate of return than the return inherent in loans if held to maturity given the general lack of market liquidity. The valuation of the loan portfolio reflects discounts that WesBanco believes are consistent with transactions occurring in the marketplace for both performing and distressed loan types. The carrying value that fair value is compared to is net of the allowance for loan losses and other associated premiums and discounts.

Loans held for sale — Loans held for sale are carried, in aggregate, at the lower of cost or fair value.

Accrued interest receivable — The carrying amount of accrued interest receivable approximates its fair value.

Bank-owned life insurance — The carrying value of bank-owned life insurance represents the net cash surrender value of the underlying insurance policies, should these policies be terminated. Management believes that the carrying value approximates fair value.

Deposits — The carrying amount is considered a reasonable estimate of fair value for demand, savings and other variable rate deposit accounts. The fair value of fixed maturity certificates of deposit is estimated by a discounted cash flow method using the rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank borrowings — For FHLB borrowings, fair value is based on rates currently available to WesBanco for borrowings with similar terms and remaining maturities.

Other borrowings — Fair values for federal funds purchased and repurchase agreements are based on quoted market prices, if available. If market prices are not available, then quoted market prices of similar instruments are used.

Junior subordinated debt owed to unconsolidated subsidiary trusts — Due to the pooled nature of these instruments, which are not actively traded on an equity market, estimated fair value is based on broker prices from recent similar sales.

Accrued interest payable — The carrying amount of accrued interest payable approximates its fair value.

Off-balance sheet financial instruments — Off-balance sheet financial instruments consist of commitments to extend credit including letters of credit. Fair values for commitments to extend credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit standing of the counterparties. The estimated fair value of the commitments to extend credit and letters of credit are insignificant and therefore not presented in the above table.

NOTE 9. COMMITMENTS AND CONTINGENT LIABILITIES

Commitments — In the normal course of business, WesBanco offers off-balance sheet credit arrangements to enable its customers to meet their financing objectives. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. WesBanco’s exposure to credit losses in the event of non-performance by the other parties to the financial instruments for commitments to extend credit and standby letters of credit is limited to the contractual amount of those instruments. WesBanco uses the same credit policies in making commitments and conditional obligations as for all other lending. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The allowance for credit losses associated with loan commitments was $0.7 million and $1.4 million as of June 30, 2011 and December 31, 2010 respectively, and is included in other liabilities on the Consolidated Balance Sheets.

Letters of credit are conditional commitments issued by banks to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including normal business activities, bond financing and similar transactions. Standby letters of credit are considered guarantees. The liability associated with standby letters of credit is recorded at its estimated fair value of $0.1 million as of both June 30, 2011 and December 31, 2010, respectively, and is included in other liabilities on the Consolidated Balance Sheets.

Affordable housing plan guarantees are performance guarantees for various building project loans. The guarantee amortizes as the loan balances decrease.

The following table presents total commitments to extend credit, guarantees and various letters of credit outstanding:


*(unaudited, in thousands)*	June 30, 2011		December 31, 2010

Commitments to extend credit	$	717,377	$	648,839
Standby letters of credit		34,754		35,794
Affordable housing plan guarantees		4,197		4,255

CONTINGENT LIABILITIES—WesBanco and its subsidiaries are parties to various legal and administrative proceedings and claims. While any claim contains an element of uncertainty, management believes that the outcome of such proceedings or claims pending or known to be threatened will not have a material adverse effect on WesBanco’s consolidated financial position.

NOTE 10. BUSINESS SEGMENTS

WesBanco operates two reportable segments: community banking and trust and investment services. WesBanco’s community banking segment offers services traditionally offered by full-service commercial banks, including commercial demand, individual demand and time deposit accounts, as well as commercial, mortgage and individual installment loans, and certain non-traditional offerings, such as insurance and securities brokerage services. The trust and investment services segment offers trust services as well as various alternative investment products including mutual funds. The market value of assets of the trust and investment services segment was approximately $3.0 billion and $2.6 billion at June 30, 2011 and 2010, respectively. These assets are held by WesBanco in fiduciary or agency capacities for their customers and therefore are not included as assets on WesBanco’s Consolidated Balance Sheets.

Condensed financial information by business segment is presented below:


(unaudited, in thousands)	Community Banking		Trust and Investment Services		Consolidated

For the Three Months ended June 30, 2011:
Interest income	$	57,042	$	-	$	57,042
Interest expense		13,989		-		13,989
Net interest income		43,053		-		43,053
Provision for credit losses		6,802		-		6,802
Net interest income after provision for credit losses		36,251		-		36,251
Non-interest income		10,744		4,272		15,016
Non-interest expense		33,208		2,495		35,703
Income before provision for income taxes		13,787		1,777		15,564
Provision for income taxes		2,935		711		3,646
Net income	$	10,852	$	1,066	$	11,918

For the Three Months ended June 30, 2010:
Interest income	$	59,597	$	-	$	59,597
Interest expense		18,449		-		18,449
Net interest income		41,148		-		41,148
Provision for credit losses		11,675		-		11,675
Net interest income after provision for credit losses		29,473		-		29,473
Non-interest income		10,949		3,636		14,585
Non-interest expense		32,107		2,460		34,567
Income before provision for income taxes		8,315		1,176		9,491
Provision for income taxes		783		470		1,253
Net income	$	7,532	$	706	$	8,238

For the Six Months ended June 30, 2011:
Interest income	$	113,139	$	-	$	113,139
Interest expense		28,610		-		28,610
Net interest income		84,529		-		84,529
Provision for credit losses		14,843		-		14,843
Net interest income after provision for credit losses		69,686		-		69,686
Non-interest income		20,487		9,034		29,521
Non-interest expense		66,122		5,072		71,194
Income before provision for income taxes		24,051		3,962		28,013
Provision for income taxes		4,269		1,585		5,854
Net income	$	19,782	$	2,377	$	22,159

For the Six Months ended June 30, 2010:
Interest income	$	120,162	$	-	$	120,162
Interest expense		38,382		-		38,382
Net interest income		81,780		-		81,780
Provision for credit losses		23,175		-		23,175
Net interest income after provision for credit losses		58,605		-		58,605
Non-interest income		21,932		7,694		29,626
Non-interest expense		65,046		4,914		69,960
Income before provision for income taxes		15,491		2,780		18,271
Provision for income taxes		1,010		1,112		2,122
Net income	$	14,481	$	1,668	$	16,149

Total non-fiduciary assets of the trust and investment services segment were $2.6 million and $1.6 million at June 30, 2011 and 2010, respectively. All goodwill and other intangible assets were allocated to the community banking segment.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis represents an overview of the results of operations and financial condition of WesBanco. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes thereto.

FORWARD-LOOKING STATEMENTS

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, 2010 and documents subsequently filed by WesBanco with the Securities and Exchange Commission (“SEC”), including WesBanco’s Form 10-Q for the quarter ended March 31, 2011, which are available at the SEC’s website www.sec.gov or at WesBanco’s website, www.wesbanco.com. 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 could cause actual results to differ materially from those contemplated by such statements, including without limitation, the effects of changing regional and national economic conditions; changes in interest rates, spreads on earning assets and interest-bearing liabilities, and associated interest rate sensitivity; sources of liquidity available to WesBanco and its related subsidiary operations; potential future credit losses and the credit risk of commercial, real estate, and consumer loan customers and their borrowing activities; actions of the Federal Reserve Board, the Federal Deposit Insurance Corporation, the SEC, Financial Institution Regulatory Authority, Municipal Securities Rulemaking Board, Securities Investors Protection Corporation, and other regulatory bodies; potential legislative and federal and state regulatory actions and reform, including, without limitation, the impact of the implementation of the Dodd-Frank Act; adverse decisions of federal and state courts; fraud, scams and schemes of third parties; internet hacking; competitive conditions in the financial services industry; rapidly changing technology affecting financial services; marketability of debt instruments and corresponding impact on fair value adjustments; and/or other external developments materially impacting WesBanco’s operational and financial performance. WesBanco does not assume any duty to update forward-looking statements.

OVERVIEW

WesBanco is a multi-state bank holding company operating through 112 branches, one loan production office and 124 ATM machines in West Virginia, Ohio and western Pennsylvania, offering retail banking, corporate banking, personal and corporate trust services, brokerage services, mortgage banking and insurance. WesBanco’s businesses are significantly impacted by economic factors such as market interest rates, federal monetary and regulatory policies, local and regional economic conditions and the competitive environment’s effect upon WesBanco’s business volumes. WesBanco’s deposit levels are affected by numerous factors including personal savings rates, personal income, and competitive rates on alternative investments, as well as competition from other financial institutions within the markets we serve and liquidity needs of WesBanco. Loan levels are also subject to various factors including construction demand, business financing needs, consumer spending and interest rates, as well as loan terms offered by competing lenders.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

WesBanco’s critical accounting policies involving the significant judgments and assumptions used in the preparation of the Consolidated Financial Statements as of June 30, 2011 have remained unchanged from the disclosures presented in WesBanco’s Annual Report on Form 10-K for the year ended December 31, 2010 under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

RESULTS OF OPERATIONS

EARNINGS SUMMARY

Net income for the quarter ended June 30, 2011 was $11.9 million as compared to $8.2 million for the second quarter of 2010, representing an increase of 44.7%, while diluted earnings per share were $0.45, as compared to $0.31 per share for the second quarter of 2010. For the six month period ended June 30, 2011, net income was $22.2 million as compared to $16.1 million for the same period in 2010, representing an increase of 37.2%, while diluted earnings per share were $0.83, as compared to $0.61 per share for the six months ended June 30, 2010.

Net interest income increased $1.9 million or 4.6% in the second quarter and $2.7 million or 3.4% in the first half of 2011 as compared to the same periods in 2010 due to increases in the net interest margin through disciplined pricing of loans and deposits. The net interest margin improved to 3.73% in the second quarter and to 3.70% in the first half of 2011, an increase of 17 and 13 basis points, respectively, as compared to the same periods of 2010 and increased 6 basis points in the second quarter as compared to the first quarter of 2011. The average rate on interest bearing liabilities decreased by 39 basis points in the second quarter and 42 basis points in the year-to-date period, while the rate on earning assets declined at a slower pace of 20 and 27 basis points, respectively. Lower offered rates on maturing, higher-rate certificates of deposit, an increase in lower-cost deposit products, and utilization of liquidity from increased deposits and loan balance reductions to reduce higher cost borrowings all contributed to the improvement in the cost of funds. Portfolio loans, which generally provide the highest rates within earning assets, decreased only 0.8% since year end and were up slightly in the second quarter as compared to March 31, 2011 as loan demand improved.

The provision for credit losses decreased $4.9 million in the second quarter and $8.3 million in the first six months of 2011 as compared to the same periods in 2010. Net charge-offs decreased $5.2 million in the second quarter as compared to the second quarter of 2010, and $1.4 million as compared to the first quarter of 2011, and remain significantly below average quarterly net charge-offs over the last two years. Classified and

criticized commercial loans at June 30, 2011 decreased $33.8 million compared to June 30, 2010 and $3.8 million compared to March 31, 2011. Non-accrual loans decreased 4.7% as compared to June 30, 2010, while increasing 4.1% as compared to the first quarter of 2011; however, certain loans that migrated to non-accrual during the quarter were previously classified and reserved for in prior periods. The allowance for loan losses was relatively unchanged at June 30, 2011 as compared to December 31, 2010 and was 1.88% of total loans as compared to 1.86% at December 31, 2010 and 1.92% at June 30, 2010.

In the second quarter of 2011 non-interest income increased $0.4 million as compared to the second quarter of 2010 and was nearly unchanged in the year-to-date period as compared to 2010. The quarterly increase was due to a 17.5% increase in trust fees from new business, fee increases and market improvements, a 15.2% increase in electronic banking fees and a $1.0 million decrease in net losses on other real estate owned. These improvements were partially offset by decreases in service charges on deposits resulting from regulatory changes which led to fewer customer overdraft transactions, as well as reduced net security gains. Similar trends were evident in the year-to-date period.

Non-interest expense increased $1.1 million or 3.3% in the second quarter and $1.2 million or 1.8% in the first six months of 2011, as compared to the same periods in 2010. In the second quarter, salaries and wages increased $0.4 million due to regular compensation increases in the current quarter, marketing increased $0.5 million from promotions focused on growing demand deposits and home equity loans, and other operating expenses increased $1.2 million primarily due to charges relating to retail customer fraud and professional fees. These increases were partially offset by reduced FDIC insurance and equipment expense. Year-to-date, salaries and wages increased $0.8 million, due in part to routine annual adjustments to compensation, marketing increased $0.9 million due to the aforementioned promotions and other operating expenses increased $1.0 million, partially offset by decreases in FDIC insurance and equipment expenses. The provision for income taxes increased $2.4 million in the second quarter and $3.7 million in the six month period as compared to the same periods in 2010 due to increased taxable earnings and an increase in the year-to-date effective tax rate to 20.9% from 11.6% in 2010 as the ratio of taxable income to tax-exempt income increased.

NET INTEREST INCOME

TABLE 1. NET INTEREST INCOME


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
*(unaudited, dollars in thousands)*	2011		2010		2011		2010

Net interest income	$	43,053	$	41,148	$	84,529	$	81,780
Taxable equivalent adjustments to net interest income		1,640		1,535		3,248		3,148
Net interest income, fully taxable equivalent	$	44,693	$	42,683	$	87,777	$	84,928
Net interest spread, non-taxable equivalent		3.41%		3.23%		3.37%		3.23%
Benefit of net non-interest bearing liabilities		0.18%		0.20%		0.19%		0.21%
Net interest margin		3.59%		3.43%		3.56%		3.44%
Taxable equivalent adjustment		0.14%		0.13%		0.14%		0.13%
Net interest margin, fully taxable equivalent		3.73%		3.56%		3.70%		3.57%

Net interest income, which is WesBanco’s largest source of revenue, is the difference between interest income on earning assets, primarily loans and securities, and interest expense on liabilities, comprised of deposits and short and long-term borrowings. Net interest income is affected by the general level of and changes in interest rates, the steepness of the yield curve, changes in the amount and composition of interest earning assets and interest bearing liabilities, as well as the frequency of repricing and turnover of those assets and liabilities. Net interest income increased $1.9 million or 4.6% in the second quarter and $2.7 million or 3.4% in the first half of 2011 as compared to the same periods in 2010 due to increases in the net interest margin through disciplined pricing of loans and deposits. Significant improvements in the funding mix through decreases in higher cost CD’s and borrowings were the principal factor in the improvement in net interest income. Interest income from the investment portfolio has increased by 2.1% in the first six months of 2011 due to an increase in average outstanding balances of $229.4 million partially offset by a decrease in the average rates earned. The net interest margin improved to 3.73% in the second quarter and to 3.70% in the first half of 2011, an increase of 17 and 13 basis points, respectively, as compared to the same periods of 2010. The average rate on interest bearing liabilities decreased by 39 basis points in the second quarter and 42 basis points in the year-to-date period, while the rate on earning assets declined at a slower pace of 20 and 27 basis points, respectively. Lower offered rates on maturing, higher-rate certificates of deposit and an increase in lower-cost products including checking, money market and savings accounts all contributed to the improvement in the cost of funds. Average total deposits increased 3.5% in the second quarter. This growth includes new deposits received from customers participating in Marcellus shale gas activity. The average balance for FHLB borrowings, which have the highest average interest cost at 3.47% and represent 14.3% of interest expense, decreased by $175.2 million or 43.1% in the second quarter of 2011 from the second quarter of 2010 while earning assets were nearly unchanged. FHLB borrowings dropped to 4.2% of total assets from 5.8% at June 30, 2010. Average non-interest bearing deposit balances increased 13.2% in the second quarter as a result of retail marketing campaigns, and customer incentives, as well as increased balances of the Bank’s business customers, also contributing to lower funding costs.

Interest income decreased 4.3% in the second quarter and 5.8% in the year-to-date period of 2011 as compared to the same periods in 2010 due to lower yields while total average earning assets were nearly unchanged. The yield decreased 20 basis points to 4.90% in the second quarter and 27 basis points to 4.91% in the first six months of 2011. Rates decreased on all significant earning asset categories from reduced rates on new and repriced assets due to competition and the lower interest rate environment. In addition, the percentage of earning assets invested in lower yielding securities increased, as compared to typically higher-yielding loans. Securities yields decreased, primarily due to the reinvestment of funds from investment maturities and calls at current lower available interest rates. Taxable securities yields decreased 43 basis points in the second quarter while tax-exempt securities yields declined only 38 basis points due to the longer average life of the tax-exempt portfolio and limited additions to this

portfolio. In addition, mortgage backed, variable rate and government supported (Build America Bonds during 2010) rate opportunities were available in taxable securities, resulting in an increase in average taxable securities. Repricing of loans and the competitive necessity of offering lower rates on quality credits in an increasingly competitive and lower interest rate environment caused a decline in loan yields of 13 basis points in the second quarter and 15 basis points in the first six months of 2011. In addition, during a period where customer loan demand and the economic environment limited loan growth opportunities, proceeds from loan principal reductions, which generally have higher yields, have been reinvested at lower yields, thus reducing the overall yield of the earning assets.

Average loan balance decreases over the past year are primarily due to management’s continued focus on overall profitability and quality of the loan portfolio through disciplined underwriting and pricing practices, strategic decreases in residential real estate loans through the sale of most originations through the end of 2010, and the sale or other exit strategies for certain non-accrual, impaired or otherwise underperforming commercial loans. In addition, the slow economic recovery has resulted in businesses and consumers remaining cautious, leading to lower demand for new development projects in our markets and reduced commercial line usage. Consumer loans declined due to reduced demand and overall poorer credit quality of new applicants for automobile and other consumer loan types. However, total portfolio loans at June 30, 2011 decreased only 0.8% since December 31, 2010 and were up slightly in the second quarter as compared to March 31, 2011, and consumer and residential loan demand increased related to recent marketing promotions.

In the second quarter of 2011 interest expense decreased 24.2% and, in the first six months of 2011, interest expense decreased 25.5% as compared to the same periods of 2010 due to decreases in both rates paid and in certain average liability balances. The average rate paid on interest bearing liabilities decreased 39 basis points to 1.35% in the second quarter and 42 basis points to 1.40% in the first six months of 2011, while interest bearing liabilities decreased 2.2% and 2.6%, respectively. Rates paid on deposits declined by 33 basis points in the second quarter and 35 basis points in the first half primarily due to declines in rates paid in all deposit categories with the largest declines in money market accounts and CDs. These declines are due to management reducing interest rates in all categories, including renewing and new CDs, to competitive levels in order to realize a lower cost of funds during a period of declining loan yields. Improvements in the mix of deposit accounts also contributed to the improved cost of funds, with average CDs decreasing to 38.6% of total average deposits in the second quarter, from 42.7% in the same quarter of 2010, while all other account types increased to 61.4%. The reduction in average interest bearing liabilities is primarily due to the decrease in FHLB borrowings, partially offset by increases in average interest bearing deposits of $72.6 million. Current balance sheet liquidity from the deposit increases and loan reductions were used to pay down higher-cost maturing borrowings, also contributing to the reduced cost of funds. FHLB borrowings were 5.6% of average interest bearing liabilities in the second quarter as compared to 9.6% in 2010. Average deposits increased significantly in every category other than CDs with the largest increase in money market accounts, even as offered rates were reduced. Certificates of deposits decreased by $113.9 million due to paydowns of certain Certificate of Deposit Account Registry Service (CDARS^®) time deposits, reductions in rate offerings and customer demand for other shorter-term deposit products.

TABLE 2. AVERAGE BALANCE SHEETS AND NET INTEREST MARGIN ANALYSIS


	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2011				2010				2011				2010
*(unaudited, dollars in thousands)*	Average Balance		Average Rate		Average Balance		Average Rate		Average Balance		Average Rate		Average Balance		Average Rate

ASSETS
Due from banks - interest bearing	$	36,602		0.27%	$	114,710		0.24%	$	44,952		0.20%	$	104,171		0.19%
Loans, net of unearned income⁽¹⁾		3,249,625		5.49%		3,421,647		5.62%		3,256,821		5.50%		3,438,814		5.65%
Securities:⁽²⁾
Taxable		1,189,965		3.17%		969,547		3.60%		1,149,507		3.16%		944,079		3.78%
Tax-exempt⁽³⁾		302,831		6.19%		267,250		6.57%		297,320		6.24%		273,308		6.58%
Total securities		1,492,796		3.78%		1,236,797		4.24%		1,446,827		3.79%		1,217,387		4.41%
Other earning assets		25,546		0.45%		30,122		0.57%		26,592		0.49%		30,313		0.63%
Total earning assets⁽³⁾		4,804,569		4.90%		4,803,276		5.10%		4,775,192		4.91%		4,790,685		5.18%
Other assets		624,178				633,734				621,044				635,053
Total Assets	$	5,428,747			$	5,437,010			$	5,396,236			$	5,425,738

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing demand deposits	$	519,460		0.39%	$	471,500		0.54%	$	506,091		0.40%	$	465,357		0.57%
Money market accounts		896,601		0.54%		814,694		1.08%		882,706		0.63%		780,870		1.07%
Savings deposits		568,462		0.25%		511,827		0.49%		555,599		0.30%		503,894		0.49%
Certificates of deposit		1,638,775		1.94%		1,752,648		2.13%		1,657,027		1.94%		1,762,184		2.23%
Total interest bearing deposits		3,623,298		1.11%		3,550,669		1.44%		3,601,423		1.15%		3,512,305		1.50%
Federal Home Loan Bank borrowings		231,153		3.47%		406,387		3.52%		235,624		3.45%		438,975		3.63%
Other borrowings		186,735		2.55%		174,199		2.70%		187,245		2.55%		180,193		2.63%
Junior subordinated debt		106,046		3.07%		111,171		3.40%		106,042		3.07%		111,171		3.60%
Total interest bearing liabilities		4,147,232		1.35%		4,242,426		1.74%		4,130,334		1.40%		4,242,644		1.82%
Non-interest bearing demand deposits		626,502				553,487				613,955				545,812
Other liabilities		35,059				36,763				36,904				36,087
Shareholders’ Equity		619,954				604,334				615,043				601,195
Total Liabilities and Shareholders’ Equity	$	5,428,747			$	5,437,010			$	5,396,236			$	5,425,738

Taxable equivalent net interest spread				3.55%				3.36%				3.51%				3.36%
Taxable equivalent net interest margin				3.73%				3.56%				3.70%				3.57%

⁽¹⁾

Gross of allowance for loan losses and net of unearned income. Includes non-accrual and loans held for sale. Loan fees included in interest income on loans for the three and six months ended totaled $1.4 million and $2.3 million for 2011, and $1.1 million and $2.2 million for the same periods in 2010.

⁽²⁾	Average yields on available-for-sale securities are calculated based on amortized cost.

⁽³⁾	Taxable equivalent basis is calculated on tax-exempt securities using a tax rate of 35% for each year presented.

TABLE 3. RATE/VOLUME ANALYSIS OF CHANGES IN INTEREST INCOME AND INTEREST EXPENSE


	Three Months Ended June 30, 2011 Compared to June 30, 2010									Six Months Ended June 30, 2011 Compared to June 30, 2010
*(unaudited, in thousands)*	Volume			Rate			Net Increase (Decrease)			Volume			Rate			Net Increase (Decrease)

Increase (decrease) in interest income:
Due from banks - interest bearing	$	(46	)	$	3		$	(43	)	$	(58	)	$	2		$	(56	)
Loans, net of unearned income		(2,064	)		(1,336	)		(3,400	)		(5,008	)		(2,418	)		(7,426	)
Taxable securities		1,828			(1,121	)		707			3,517			(3,213	)		304
Tax-exempt securities⁽¹⁾		561			(261	)		300			764			(477	)		287
Federal funds sold		-			-			-			-			-			-
Other earning assets		(7	)		(7	)		(14	)		(37	)		5			(32	)
Total interest income change⁽¹⁾		272			(2,722	)		(2,450	)		(822	)		(6,101	)		(6,923	)

Increase (decrease) in interest expense:
Interest bearing demand deposits		62			(197	)		(135	)		107			(409	)		(302	)
Money market accounts		208			(1,185	)		(977	)		485			(1,833	)		(1,348	)
Savings deposits		65			(339	)		(274	)		116			(505	)		(389	)
Certificates of deposit		(548	)		(845	)		(1,393	)		(1,115	)		(2,387	)		(3,502	)
Federal Home Loan Bank borrowings		(1,482	)		(82	)		(1,564	)		(3,495	)		(378	)		(3,873	)
Other borrowings		89			(74	)		15			91			(74	)		17
Junior subordinated debt		(40	)		(92	)		(132	)		(88	)		(287	)		(375	)
Total interest expense change		(1,646	)		(2,814	)		(4,460	)		(3,899	)		(5,873	)		(9,772	)
Net interest income increase (decrease) ⁽¹⁾	$	1,918		$	92		$	2,010		$	3,077		$	(228	)	$	2,849

(1) Taxable equivalent basis is calculated on tax-exempt securities using a tax rate of 35% for each year presented.

PROVISION FOR CREDIT LOSSES

The provision for credit losses is the amount to be added to the allowance for credit losses after net charge-offs have been deducted to bring the allowance to a level considered appropriate to absorb probable losses inherent in the loan portfolio. The provision for credit losses decreased $4.9 million in the second quarter and $8.3 million in the first six months of 2011 as compared to the same periods in 2010. The provision was higher in 2010 due to the ongoing impact of the recession on all categories of the portfolio but the decrease in 2011 reflects a gradually improving credit quality. Net charge-offs in the most recent three quarters ending June 30, 2011 were significantly below average quarterly net charge-offs over the last two years. Non-accrual loans decreased 4.7% as compared to June 30, 2010, while increasing 4.1% as compared to the first quarter of 2011; however, certain loans that migrated to non-accrual during the quarter were previously classified or reported as troubled debt restructurings and reserved for in prior periods. Total classified and criticized loans, which include non-accrual loans and troubled debt restructurings decreased 9.9% and 1.2% at June 30, 2011 as compared to June 30, 2010 and March 31, 2011 respectively. The allowance for loan losses was relatively unchanged at June 30, 2011 as compared to December 31, 2010 and was 1.88% of total loans as compared to 1.86% at December 31, 2010 and 1.92% at June 30, 2010. (Please see the Allowance for Credit Losses section of this MD&A for additional discussion).

NON-INTEREST INCOME

TABLE 4. NON-INTEREST INCOME


	For the Three Months Ended June 30,											For the Six Months Ended June 30,
*(unaudited, dollars in thousands)*	2011			2010			$ Change			% Change		2011			2010			$ Change			% Change

Trust fees	$	4,272		$	3,636		$	636			17.5%	$	9,034		$	7,694		$	1,340			17.4%
Service charges on deposits		4,889			5,701			(812	)		(14.2%)		9,111			11,018			(1,907	)		(17.3%)
Electronic banking fees		2,523			2,190			333			15.2%		4,807			4,105			702			17.1%
Net securities brokerage and insurance services revenue		1,694			1,616			78			4.8%		3,415			3,466			(51	)		(1.5%)
Bank-owned life insurance		900			966			(66	)		(6.8%)		1,794			1,910			(116	)		(6.1%)
Net gains on sales of mortgage loans		389			569			(180	)		(31.6%)		971			1,094			(123	)		(11.2%)
Net securities gains		14			898			(884	)		(98.4%)		30			2,303			(2,273	)		(98.7%)
Net loss on other real estate owned and other assets		(271	)		(1,315	)		1,044			79.4%		(816	)		(2,845	)		2,029			71.3%
Other income		606			324			282			87.0%		1,175			881			294			33.4%
Total non-interest income	$	15,016		$	14,585		$	431			3.0%	$	29,521		$	29,626		$	(105	)		(0.4%)

Non-interest income is a significant source of revenue and an important part of WesBanco’s results of operations. WesBanco offers its customers a wide range of retail, commercial, investment and electronic banking services, which are viewed as a vital component of WesBanco’s ability to attract and maintain customers, as well as providing additional fee income beyond normal spread-related income to WesBanco. In the second quarter of 2011 non-interest income increased $0.4 million as compared to the second quarter of 2010 and was nearly unchanged in the year-to-date period as compared to 2010. The quarterly increase was due to a 17.5% increase in trust fees from new business, fee increases and market improvements, a 15.2% increase in electronic banking fees and a $1.0 million decrease in net losses on other real estate owned. These improvements were partially offset by decreases in service charges on deposits, as well as reduced net security gains. Similar trends were evident in the year-to-date period; however, service charges on deposits increased 15.8% in the second quarter as compared to the first quarter of 2011. For the three and six months ended June 30, 2011, non-interest income was 25.9% of total net revenues. This percentage relationship was nearly unchanged compared to the same periods in 2010. Net revenue is defined as the total of net interest income and non-interest income.

Trust fees improved $0.6 million and $1.3 million in the second quarter and year-to-date period as compared to 2010 due to higher market values of managed assets, new business and the implementation of a fee increase in October of 2010. As a result of captured new business and overall market improvements, the market value of trust assets under management increased from $2.6 billion to $3.0 billion from June 30, 2010 to June 30, 2011. At June 30, 2011, trust assets include managed assets of $2.4 billion and non-managed (custodial) assets of $0.6 billion. Assets managed for the WesMark funds, a proprietary group of mutual funds that are advised by WesBanco’s trust and investment services group, were $771.8 million as of June 30, 2011 and $662.4 million at June 30, 2010 and are included in trust managed assets.

Electronic banking fees, which include debit card interchange fees, improved by $0.3 million and $0.7 million in the second quarter and first half of 2011 as compared to the same period in the prior year, due to a higher volume of debit card transactions during the period which have continued to grow as customers move more towards electronic transactions from checks and other forms of payment. Recent regulatory changes place a cap on debit card interchange fees which become effective October 1, 2011 for issuers with more than $10 billion in assets. WesBanco anticipates some impact on its electronic banking fees from these changes even though it is not directly subject to the new regulations.

Service charges on deposits, which are primarily comprised of customer overdraft fees, were 17.3% lower in the first half of 2011 as compared to the same period in 2010 due to changes in customer behavior and recent regulatory changes that include requirements for customers to opt in for overdraft coverage of certain types of electronic banking activities. Preceding the August 15, 2010 implementation of the new rules on existing accounts, WesBanco experienced lower daily and monthly overdraft usage patterns as average retail demand deposit balances were higher. Changes in marketing strategies and effectiveness for new demand deposit customers may have also had an impact on the decrease. While an overwhelming majority of WesBanco’s heaviest overdraft users have opted-in to continue such coverage, low response rates from infrequent users may have some impact on our ability to earn associated fees, as does continuing higher average customer deposit account balances. Service charges on deposits increased 15.8% in the second quarter as compared to the first quarter of 2011 due to improved overdraft demand which breaks the trend of declining revenue in this category for the past three consecutive quarters.

Net losses on the sale of other real estate owned decreased by $2.0 million for the six months ended June 30, 2011 as compared to the first six months of 2010 due to ongoing liquidation efforts and a prior year loss taken on a large hospitality-owned property, while gains on the sale of mortgage loans declined in 2011 by 11.2% as compared to the same period in 2010 primarily from a strategic effort initiated early in 2011 to retain more 15 year, or lower maturity, residential mortgage loans in the portfolio instead of selling most of these originations to the secondary market.

NON-INTEREST EXPENSE

TABLE 5. NON-INTEREST EXPENSE


	For the Three Months Ended June 30,									For the Six Months Ended June 30,
*(unaudited, dollars in thousands)*	2011		2010		$ Change			% Change		2011		2010		$ Change			% Change

Salaries and wages	$	13,800	$	13,362	$	438			3.3%	$	27,385	$	26,576	$	809			3.0%
Employee benefits		4,408		4,347		61			1.4%		9,632		9,344		288			3.1%
Net occupancy		2,461		2,540		(79	)		(3.1%)		5,382		5,599		(217	)		(3.9%)
Equipment		2,145		2,376		(231	)		(9.7%)		4,444		4,980		(536	)		(10.8%)
Marketing		1,642		1,155		487			42.2%		2,647		1,785		862			48.3%
FDIC Insurance		1,015		1,683		(668	)		(39.7%)		2,669		3,288		(619	)		(18.8%)
Amortization of intangible assets		605		685		(80	)		(11.7%)		1,223		1,384		(161	)		(11.6%)
Restructuring and merger-related expenses		-		7		(7	)		(100.0%)		-		206		(206	)		(100.0%)
Other operating expenses:
Miscellaneous, franchise, and other taxes		1,401		1,525		(124	)		(8.1%)		2,764		3,029		(265	)		(8.7%)
Postage		815		872		(57	)		(6.5%)		1,687		1,805		(118	)		(6.5%)
Consulting, regulatory, accounting and advisory fees		1,015		871		144			16.5%		1,919		1,727		192			11.1%
Other real estate owned and foreclosure expenses		771		749		22			2.9%		1,502		1,462		40			2.7%
Legal fees		734		706		28			4.0%		1,374		1,418		(44	)		(3.1%)
Communications		668		677		(9	)		(1.3%)		1,337		1,370		(33	)		(2.4%)
ATM and interchange expenses		748		668		80			12.0%		1,419		1,360		59			4.3%
Supplies		621		584		37			6.3%		1,214		1,187		27			2.3%
Other		2,854		1,760		1,094			62.2%		4,596		3,440		1,156			33.6%
Total other operating expenses		9,627		8,412		1,215			14.4%		17,812		16,798		1,014			6.0%
Total non-interest expense	$	35,703	$	34,567	$	1,136			3.3%	$	71,194	$	69,960	$	1,234			1.8%

Non-interest expense increased $1.1 million or 3.3% in the second quarter and $1.2 million or 1.8% in the first six months of 2011, as compared to the same periods in 2010. In the second quarter, salaries and wages increased $0.4 million due to regular compensation increases in the current quarter, marketing increased $0.5 million from promotions focused on growing demand deposits and home equity loans, and other operating expenses increased $1.2 million primarily due to charges relating to retail customer fraud and professional fees. These increases were partially offset by reduced FDIC insurance and equipment expense. A new calculation of FDIC insurance expense was effective April 1, 2011 which reduced this expense by $0.7 million for the quarter. Savings under this new calculation are anticipated to continue in future quarters. Year-to-date, salaries and wages increased $0.8 million, due in part to routine annual adjustments to compensation. Marketing increased $0.9 million due to the aforementioned promotions and other operating expenses increased $1.0 million, partially offset by decreases in FDIC insurance and equipment expense of $0.6 million and $0.5 million respectively.

Salaries and wages increased 3.3% and 3.0% for the three and six months ended June 30, 2011 as compared to the same period in 2010, primarily due to regular employee compensation increases and higher bonus and commission expenses. Employee benefits also increased slightly due to higher stock compensation expense partially offset by lower employee health insurance and defined benefit pension costs.

Marketing expenses increased $0.5 million and $0.9 million in the three and six months ended June 30, 2011 as compared to the same periods in 2010 primarily due to increased customer cash incentives and free checking promotions focused on growing automobile loans, home equity loans, mortgages and demand deposits.

Restructuring and merger-related expenses declined $0.2 million in the first half of 2011 as compared to the prior period primarily as a result of charges early in 2010 relating to personnel reductions.

Net occupancy in the first half of 2011 declined due to lower seasonal maintenance expenses, while equipment declined due to decreased depreciation expense with some additional reductions in service agreement expenses.

Miscellaneous taxes declined $0.1 million in the second quarter and $0.3 million year-to-date compared to 2010 due to lower franchise taxes in Ohio and West Virginia.

Other operating expenses in the second quarter and first half of 2011 increased $1.2 million and $1.0 million, respectively, as compared to the same periods in 2010 primarily due to one-time charges relating to retail customer fraud in the second quarter.

INCOME TAXES

The provision for federal and state income taxes increased to $5.9 million for the six months ended June 30, 2011 as compared to $2.1 million in the same 2010 period. The increase in income tax expense was due to a $9.7 million increase in pre-tax income, resulting in a higher effective tax rate of 20.9% as compared to 11.6% for the same period in 2010. The increase in the effective tax rate was due primarily to higher pretax income for 2011 and a higher ratio of taxable income to tax-exempt income.

FINANCIAL CONDITION

Total assets increased 1.2% in the first six months of 2011, while total shareholders’ equity increased 2.7% as compared to December 31, 2010. The net loan portfolio declined 0.8% from December 31, 2010, but increased slightly in the second quarter as compared to March 31, 2011, while investment securities and cash and due from banks increased by 6.8%. The loan portfolio decrease is a result of a reduced loan demand and a focus on maintaining credit quality along with normal paydowns. Deposits increased 1.2% from December 31, 2010 primarily due to a 5.0% increase in money market deposits, which, combined with a 4.9% increase in demand deposits and a 7.5% increase in savings deposits more than offset a 5.1% decrease in CDs. The reduction in CDs was due to planned reductions of single-relationship customers, lower offered rates for newer and rollover CDs, and customers’ desire to shorten interest rate maturities. Total shareholders’ equity increased by approximately $16.2 million primarily due to net income exceeding dividends for the period by $14.2 million, coupled with a $1.7 million increase in unrealized gains in the available-for-sale portfolio, which are included net of the tax effect in accumulated other comprehensive income.

TABLE 6. COMPOSITION OF SECURITIES (1)


*(unaudited, dollars in thousands)*	June 30, 2011		December 31, 2010		$ Change			% Change

Securities available-for-sale (at fair value):
Other government agencies	$	328,997	$	363,135	$	(34,138	)		(9.4	%)
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies		372,683		353,345		19,338			5.5	%
Obligations of states and political subdivisions		200,695		210,808		(10,113	)		(4.8%)
Corporate debt securities		31,043		25,583		5,460			21.3%
Equity securities		4,924		4,610		314			6.8%
Total securities available-for-sale	$	938,342	$	957,481	$	(19,139	)		(2.0%)
Securities held-to-maturity (at amortized cost):
Residential mortgage-backed securities and collateralized mortgage obligations of government agencies		296,082		202,062		94,020			46.5%
Other residential collateralized mortgage obligations		962		1,224		(262	)		(21.4%)
Obligations of states and political subdivisions		287,857		263,973		23,884			9.0%
Corporate debt securities		1,452		1,451		1			0.1%
Total securities held-to-maturity	$	586,353	$	468,710	$	117,643			25.1%
Total securities	$	1,524,695	$	1,426,191	$	98,504			6.9%
Available-for-sale securities:
Weighted average taxable equivalent yield at the respective period end		3.37%		3.46%
As a % of total securities		61.5%		67.1%
Weighted average life (in years)		4.0		4.0
Held-to-maturity securities:
Weighted average taxable equivalent yield at the respective period end		4.57%		4.84%
As a % of total securities		38.5%		32.9%
Weighted average life (in years)		5.9		6.8

⁽¹⁾ At June 30, 2011 and December 31, 2010, there were no holdings of any one issuer in an amount greater than 10% of WesBanco’s shareholders’ equity, other than the U.S. government and its agencies.

Total investment securities, which are a source of liquidity for WesBanco as well as a contributor to interest income, increased by 6.9% from December 31, 2010 to June 30, 2011, and by 3.9% from March 31, 2011. The increase in investments for the first half of 2011 was directly attributable to a 25.1% increase in the held-to-maturity portfolio, as the available-for-sale portfolio showed a slight decline of 2.0%. Continued risk of future increases in interest rates have caused more purchases to be designated as held-to-maturity. The increase in securities was funded primarily by increases in deposits. For the six months ended June 30, 2011, security purchases of $312.4 million were partially offset by maturities, pay-downs, and calls totaling $213.2 million. There were no security sales in the first half of 2011.

TABLE 7. COMPOSITION OF MUNICIPAL SECURITIES

The following table presents the allocation of the municipal bond portfolio based on the combined S&P and Moody’s ratings of the individual bonds:


	June 30, 2011					December 31, 2010
*(unaudited, dollars in thousands)*	Amount		% of Total			Amount		% of Total

Municipal bonds (at fair value):
AAA rating	$	49,804		10.1	%	$	44,277		9.4	%
AA rating		335,078		67.9	%		311,792		66.3	%
A rating		58,262		11.8	%		55,703		11.8	%
Below an A rating		29,648		6.0	%		38,321		8.2	%
No rating		20,971		4.2	%		20,069		4.3	%
Total municipal bond portfolio	$	493,763		100.0	%	$	470,162		100.0	%

WesBanco’s municipal bond portfolio consists of both taxable (primarily Build America Bonds) and tax-exempt general obligation and revenue bonds. As of June 30, 2011, $362.8 million or 73.5% were categorized as general obligation bonds and $131.0 million or 26.5% were categorized as revenue bonds. At December 31, 2010, $346.4 million or 73.7% were categorized as general obligation bonds and $123.8 million or 26.3% were categorized as revenue bonds.

In addition, at June 30, 2011, $48.3 million or 9.8% of the municipal bond portfolio consisted of state-issued bonds, and $445.4 million or 90.2% were locally issued. At December 31, 2010, state-issued bonds totaled $54.1 million or 11.5% and local-issued bonds totaled $416.1 million or 88.5%. The portfolio is broadly spread across the U.S., with bonds totaling 59% in the top five states of Pennsylvania, Ohio, Illinois, Texas, and West Virginia, respectively. All securities noted as below an A rating in the table are investment grade, except for one security totaling $0.3 million.

LOANS AND CREDIT RISK

Loans represent WesBanco’s single largest balance sheet asset classification and the largest source of interest income. Business purpose loans consist of commercial real estate (“CRE”) loans and other commercial and industrial (“C&I”) loans that are not secured by real estate. Consumer purpose loans consist of residential real estate loans, home equity lines of credit and other consumer loans. Loans held for sale generally consist of residential real estate loans originated for sale in the secondary market, but at times may also include other types of loans. Each category entails certain distinct elements of risk that impact the manner in which those loans are underwritten, monitored, and administered. The outstanding balance of each major category of the loan portfolio is summarized in Table 8.

The risk that borrowers will be unable or unwilling to repay their obligations and default on loans is inherent in all lending activities. In addition to the inherent risk of a change in a borrower’s repayment capacity, economic conditions and other factors beyond WesBanco’s control can adversely impact credit risk. WesBanco’s primary goal in managing credit risk is to minimize the impact of default by an individual borrower or group of borrowers. Credit risk is managed through the initial underwriting process as well as through ongoing monitoring and administration that varies by the type of loan. WesBanco’s credit policies establish standard underwriting guidelines for each type of loan and require an appropriate evaluation of the credit characteristics of each borrower. This evaluation includes the borrower’s primary source of repayment capacity; the adequacy of collateral, if any, to secure the loan; and other factors unique to each loan that may increase or mitigate its risk.

Credit risk is mitigated for all types of loans by continuously monitoring delinquency levels and pursuing collection efforts at the earliest stage of delinquency. WesBanco also monitors general economic conditions, including employment, housing activity and real estate values in each of its markets. WesBanco also periodically evaluates and changes its underwriting standards when conditions indicate that a change is warranted based on market conditions, the historical performance of a category of the portfolio, or other external factors. Credit risk is also regularly evaluated for the impact of adverse economic and other events that increase the risk of default and the potential loss in the event of default to understand their impact on the Company’s earnings and capital.

TABLE 8. COMPOSITION OF LOANS (1)

June 30, 2011

December 31, 2010

(unaudited, dollars in thousands)

Amount

% of Loans

Amount

% of Loans

Commercial real estate:

Land and construction

173,372

5.3%

154,841

4.7%

Other

1,560,381

47.8%

1,602,408

48.6%

Total commercial real estate

1,733,753

53.1%

1,757,249

53.3%

Commercial and industrial

429,162

13.1%

412,726

12.5%

Residential real estate

598,720

18.3%

608,693

18.4%

Home equity

250,678

7.7%

249,423

7.6%

Consumer

250,733

7.7%

260,585

7.9%

Total portfolio loans

3,263,046

99.9%

3,288,676

99.7%

Loans held for sale

4,205

0.1%

10,800

0.3%

Total Loans

3,267,251

100.0%

3,299,476

100.0%

⁽¹⁾ Loans are presented gross of the allowance for loan losses and net of unearned income, credit valuation adjustments, and unamortized net deferred loan fee income and loan origination costs.

Total loans decreased $32.2 million or 1.0% between December 31, 2010 and June 30, 2011. CRE land and construction loans increased $18.5 million or 12.0% as a result of funding new commercial construction loans net of $4.5 million of charge downs primarily related to two land development loans. Other CRE loans decreased $42.0 million or 2.6% due to scheduled principal repayments outpacing new loan origination, unscheduled payoffs of loans, and orderly exits of certain non-performing loans. C&I loans increased $16.4 million or 4.0% due to improved business activity and seasonality in certain lines of credit balances. Residential real estate loans decreased $10.0 million or 1.6% due to scheduled principal repayments which outpaced new loan originations retained in the portfolio. Home equity lines of credit were relatively unchanged, while consumer loans decreased $9.9 million or 3.8% due to reduced loan demand as consumers remain cautious about the economy and continue to deleverage rather than incur new debt. Loans held for sale decreased $6.6 million primarily from a strategic effort to retain more residential mortgage loans in the portfolio instead of selling to the secondary market, and from a decline in new loan originations as the housing markets remain sluggish. All loan categories were also impacted by a continued focus on improving the overall profitability and quality of the loan portfolio through disciplined underwriting and pricing practices.

NON-PERFORMING ASSETS, IMPAIRED LOANS AND LOANS PAST DUE 90 DAYS OR MORE

Non-performing assets consist of non-accrual loans and troubled debt restructurings, other real estate acquired through or in lieu of foreclosure, bank premises held for sale, and repossessed automobiles acquired to satisfy defaulted consumer loans.

TABLE 9. NON-PERFORMING ASSETS


*(unaudited, dollars in thousands)*	June 30, 2011		December 31, 2010

Non-accrual loans:
Commercial real estate - land and construction	$	11,404	$	4,391
Commercial real estate - other		28,105		24,833
Commercial and industrial		10,424		7,933
Residential real estate		10,829		10,688
Home equity		1,150		755
Consumer		129		220
Loans held for sale		-		-
Total non-accrual loans		62,041		48,820
Troubled debt restructurings:
Commercial real estate - land and construction		5,491		10,764
Commercial real estate - other		27,943		33,122
Commercial and industrial		336		73
Residential real estate		2,614		3,443
Home equity		-		-
Consumer		53		81
Total troubled debt restructurings		36,437		47,483
Total non-performing loans	$	98,478	$	96,303
Other real estate owned and repossessed assets		5,012		8,069
Total non-performing assets	$	103,490	$	104,372

Non-performing loans/total loans		3.02%		2.93%
Non-performing assets/total assets		1.91%		1.95%
Non-performing assets/total loans, other real estate and repossessed assets		3.17%		3.17%

TABLE 10. NON-PERFORMING AND IMPAIRED ASSET ACTIVITY

(unaudited, in thousands)

Non-accrual
Loans

Troubled Debt
Restructurings

Other
Impaired
Loans

Other Real
Estate and
Repossessed
Assets

Beginning balance, December 31, 2010:

48,820

47,483

13,148

8,069

Additions, including transfers from other categories

31,982

5,008

2,327

Real estate foreclosures or deeds in lieu of foreclosure

1,004

Repossessions of other collateral

1,451

Loans returning to accruing or no longer impaired

(4,437

)

(4,413

)

Net proceeds from loan sales

Other reductions, including transfers to other categories

(10,319

)

(8,449

)

Charge-offs or charge-downs

(14,499

)

(308

)

Other real estate sold

(3,587

)

Repossessed assets sold

(1,565

)

Principal payments and other changes, net

(4,262

)

(1,298

)

(431

)

(52

)

Ending balance, June 30, 2011

62,041

36,437

2,182

5,012

Non-performing loans, which consist of non-accrual loans and troubled debt restructurings, increased $2.2 million from December 31, 2010 to June 30, 2011; however, non-accrual loans increased $13.2 million or 27.1% while troubled debt restructurings decreased $11.0 million or 23.3%. Approximately $4.9 million of the increase in non-accrual loans represents the balance of two land development loans after charge downs of $4.4 million with the remainder of the increase primarily attributed to the migration of other previously classified CRE and C&I loans to non-accrual

status, including certain loans previously reported as troubled debt restructurings in prior periods being placed on non-accrual during the first six months of 2011. The decrease in troubled debt restructurings was primarily due to a $4.4 million loan being reinstated to its original repayment terms in the first quarter of 2011 and the migration of six loans totaling $10.3 million to non-accrual in the first half of the year.

Other real estate owned and repossessed assets declined from December 31, 2010 to June 30, 2011 primarily from the sale of assets during the period combined with a reduction in the amount of new foreclosures and repossessions.

TABLE 11. LOANS PAST DUE AND ACCRUING INTEREST


*(unaudited, dollars in thousands)*	June 30, 2011		December 31, 2010

Loans past due 90 days or more:
Commercial real estate - land and construction	$	-	$	277
Commercial real estate - other		443		692
Commercial and industrial		310		95
Residential real estate		4,313		4,535
Home equity		681		1,126
Consumer		985		958
Total portfolio loans		6,732		7,683
Loans held for sale		-		-
Total loans past due 90 days or more	$	6,732	$	7,683

Loans past due 30 to 89 days:
Commercial real estate - land and construction	$	377	$	252
Commercial real estate - other		3,994		4,717
Commercial and industrial		1,286		4,163
Residential real estate		6,885		7,367
Home equity		2,184		2,255
Consumer		4,321		6,020
Total portfolio loans		19,047		24,774
Loans held for sale		-		-
Total loans past due 30 to 89 days	$	19,047	$	24,774

Loans past due 90 days or more and accruing to total loans		0.21%		0.23%
Loans past due 30-89 days to total loans		0.58%		0.75%

Loans past due 90 days or more decreased $1.0 million or 12.4% from December 31, 2010 to June 30, 2011 in nearly all categories, with home equity representing 47% of the decline. These loans continue to accrue interest because they are both well secured and in the process of collection. Loans past due 30-89 days decreased $5.7 million or 23.1% from December 31, 2010 to June 30, 2011 due to seasonal fluctuations and gradually improving credit quality as economic conditions have improved.

ALLOWANCE FOR CREDIT LOSSES

The allowance for loan losses was relatively unchanged at June 30, 2011 as compared to December 31, 2010 and represented 1.88% of total loans as compared to 1.86% at December 31, 2010 and 1.92% at June 30, 2010. The decrease in the allowance from June 30, 2010 to June 30, 2011 resulted primarily from the sale of impaired loans in the third quarter of 2010 which reduced previously provided specific reserves by $5.4 million.

The decrease in the allowance for loan commitments from December 31, 2010 to June 30, 2011 represents a transfer of a reserve, associated with one loan commitment for tenant improvements to real estate that secures an impaired loan, to the allowance for loan losses to the extent the commitment was funded during the period.

TABLE 12. ALLOWANCE FOR CREDIT LOSSES


	For the Six Months Ended
	June 30,
*(unaudited, in thousands)*	2011			2010

Balance at beginning of period:
Allowance for loan losses	$	61,051		$	61,160
Allowance for loan commitments		1,404			195

Total beginning balance		62,455			61,355

Provision for credit losses:
Provision for loan losses		15,542			23,175
Provision for loan commitments		(699	)		-

Total provision for credit losses		14,843			23,175

Charge-offs:
Commercial real estate - land and construction		4,532			71
Commercial real estate - other		4,156			10,669
Commercial and industrial		3,937			3,343
Residential real estate		1,992			3,032
Home equity		448			263
Consumer		1,840			2,564

Total loan charge-offs		16,905			19,942
Deposit account overdrafts		420			487

Total loan and deposit account overdraft charge-offs		17,325			20,429

Recoveries:
Commercial real estate - land and construction		33			-
Commercial real estate - other		725			341
Commercial and industrial		330			145
Residential real estate		248			16
Home equity		9			9
Consumer		635			615

Total loan recoveries		1,980			1,126
Deposit account overdrafts		170			171

Total loan and deposit account overdraft recoveries		2,150			1,297

Net loan and deposit account overdraft charge-offs		15,175			19,132

Balance at end of period:
Allowance for loan losses		61,418			65,203
Allowance for loan commitments		705			195

Total ending balance	$	62,123		$	65,398

Net charge-offs decreased $5.2 million in the second quarter as compared to the second quarter of 2010, and $1.4 million as compared to the first quarter of 2011. Net charge-offs for the first six months of 2011 include $4.4 million attributable to two land development loans. Both of these loans were classified and previously reserved, and one of these loans was also reported as a troubled debt restructuring in previous quarters. Net annualized loan charge-offs to average loans were 0.85% for the quarter ended June 30, 2011 compared to 1.42% for same period last year.

The increase in non-accrual loans since December 31, 2010 did not have a material effect on the allowance for credit losses at June 30, 2011 or the provision for credit losses in the first six months of 2011 because loans that migrated to non-accrual during the period were previously classified and in certain instances also reported as troubled debt restructurings, and adequately reserved in prior periods. The internal risk grading of loans has more influence on the amount of the allowance than the categorization of loans as non-performing. Total commercial classified and criticized loans at June 30, 2011 decreased $33.8 million compared to June 30, 2010 and $14.5 million compared to December 31, 2010, which together with a decrease in total loans and lower historical loss rates positively impacted the provision at June 30, 2011.

Table 13 summarizes the allocation of the allowance for credit losses to each category of the loan portfolio. The allowance for CRE land and construction loans increased due to higher loss rates in this category resulting from the charge down of two land development loans in the first quarter of 2011 and higher specific reserves on impaired loans, including the amount transferred from the allowance for loan commitments. The allowance for other CRE loans decreased as a result of a modest decrease in historical loss rates and the elimination of specific reserves on certain loans that are no longer impaired. The allowance for C&I loans increased primarily as a result of a specific reserve on a loan that became impaired in the first quarter of 2011. The allowance for residential real estate, home equity, and consumer loans decreased due to moderately lower historical loss rates and lower delinquency in each of those segments of the portfolio. The allowance for deposit account overdrafts increased due to higher loss rates experienced in the second quarter of 2011.

TABLE 13. ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES


*(unaudited, dollars in thousands)*	June 30, 2011		Percent of Total		December 31, 2010		Percent of Total

Allowance for loan losses:
Commercial real estate - land and construction	$	5,095		8.2%	$	4,701		7.5%
Commercial real estate - other		30,601		49.4%		30,836		49.4%
Commercial and industrial		11,324		18.2%		10,793		17.3%
Residential real estate		5,592		9.0%		5,950		9.5%
Home equity		2,055		3.3%		2,073		3.3%
Consumer		5,366		8.6%		5,641		9.0%
Deposit account overdrafts		1,385		2.2%		1,057		1.7%
Total allowance for loan losses	$	61,418		98.9%	$	61,051		97.7%

Allowance for loan commitments:
Commercial real estate - land and construction	$	341		0.5%	$	1,037		1.7%
Commercial real estate - other		10		0.0%		285		0.5%
Commercial and industrial		300		0.5%		65		0.1%
Residential real estate		2		0.0%		1		0.0%
Home equity		38		0.1%		14		0.0%
Consumer		14		0.0%		2		0.0%
Total allowance for loan commitments		705		1.1%		1,404		2.3%
Total allowance for credit losses	$	62,123		100.0%	$	62,455		100.0%

Table 14 summarizes the impact of changes in various factors that affect the allowance for loan losses in each segment of the portfolio. The allowance for all segments is impacted by changes in loan balances as well as changes in historical loss rates adjusted for qualitative factors such as economic conditions. The CRE and C&I segments of the portfolio are also impacted by changes in the risk grading distribution of the portfolio.

TABLE 14. RECONCILIATION OF THE ALLOWANCE FOR CREDIT LOSSES BY LOAN CATEGORY

For the Six Months Ended

June 30,

2011

June 30,
2010

(unaudited, in thousands)

Commercial
Real Estate -
Land and
Construction

Commercial
Real Estate -
Other

Commercial
& Industrial

Residential
Real Estate

Home
Equity

Consumer

Deposit
Overdraft

Total

Total

Balance at beginning of year:

Allowance for loan losses

4,701

30,836

10,793

5,950

2,073

5,641

1,057

61,051

61,160

Allowance for loan commitments

1,037

285

1,404

195

Total beginning allowance for credit losses

5,738

31,121

10,858

5,951

2,087

5,643

1,057

62,455

61,355

Provision for credit losses:

Provision for loan losses

4,893

3,196

4,138

1,386

421

930

578

15,542

23,175

Provision for loan commitments

(696

)

(275

)

235

(699

)

Total provision for credit losses

4,197

2,921

4,373

1,387

445

942

578

14,843

23,175

Charge-offs

(4,532

)

(4,156

)

(3,937

)

(1,992

)

(448

)

(1,840

)

(420

)

(17,325

)

(20,429

)

Recoveries

725

330

248

635

170

2,150

1,297

Net charge-offs

(4,499

)

(3,431

)

(3,607

)

(1,744

)

(439

)

(1,205

)

(250

)

(15,175

)

(19,132

)

Balance at end of period:

Allowance for loan losses

5,095

30,601

11,324

5,592

2,055

5,366

1,385

61,418

65,203

Allowance for loan commitments

341

300

705

195

Total ending allowance for credit losses

5,436

30,611

11,624

5,594

2,093

5,380

1,385

62,123

65,398

Although the allowance for credit losses is allocated as described in Tables 13 and 14, the total allowance is available to absorb actual losses in any category of the loan portfolio. However, differences between management’s estimation of probable losses and actual incurred losses in subsequent periods for any category may necessitate future adjustments to the provision for loan losses applicable to the category. Management believes the allowance for credit losses is appropriate to absorb probable losses at June 30, 2011.

DEPOSITS

TABLE 15. DEPOSITS


	June 30,		December 31,
*(unaudited, dollars in thousands)*	2011		2010		$ Change			% Change

Non-interest bearing demand	$	629,429	$	591,052	$	38,377			6.5%
Interest bearing demand		495,807		481,129		14,678			3.1%
Money market		897,929		854,836		43,093			5.0%
Savings deposits		570,274		530,701		39,573			7.5%
Certificates of deposit		1,627,900		1,714,705		(86,805	)		(5.1%)

Total deposits	$	4,221,339	$	4,172,423	$	48,916			1.2%

Deposits, which represent WesBanco’s primary source of funds, are offered in various account forms at various rates through WesBanco’s 112 branches in West Virginia, Ohio and Western Pennsylvania. Total deposits increased by $48.9 million or 1.2% during the six months ended June 30, 2011.

Savings deposits, demand deposits and money market deposits increased by 7.5%, 4.9% and 5.0%, respectively, in the first six months of 2011 due to continued efforts to obtain more account relationships and customers’ preference for short-term maturities.

The 5.1% decline in certificates of deposit is due to the effects of an overall corporate strategy designed to re-mix retail deposit relationships with a focus on overall products that can be offered at a lower cost to the bank. The decline in certificates of deposit is also impacted by customer preferences in the current low interest rate environment and other alternatives in the marketplace. WesBanco does not typically solicit brokered or other deposits out-of-market or over the internet, but does participate in the CDARS^® program, which had $222.0 million in total outstanding balances at June 30, 2011 of which $160.2 million represented one way buys, as compared to $246.3 million in total outstanding balances at December 31, 2010. Certificates of deposit of $250,000 or more were approximately $169.9 million at June 30, 2011 as compared to $186.5 million at December 31, 2010. Certificates of deposit of $100,000 or more were approximately $757.4 million at June 30, 2011 as compared to $791.7 million at December 31, 2010. Certificates of deposit totaling approximately $797.8 million at June 30, 2011 with a cost of 1.26% are scheduled to mature within the next year. WesBanco will continue to focus on its core deposit strategies and improving its overall mix of transaction accounts to total deposits as well as offering special promotions on certain certificates of deposit maturities and savings products based on competition, sales strategies, liquidity needs and wholesale borrowing costs.

BORROWINGS

TABLE 16. BORROWINGS


	June 30,		December 31,
*(unaudited, dollars in thousands)*	2011		2010		$ Change			% Change

Federal Home Loan Bank borrowings	$	226,897	$	253,606	$	(26,709	)		(10.5%)
Other short-term borrowings		208,704		187,385		21,319			11.4%
Junior subordinated debt owed to unconsolidated subsidiary trusts		106,050		106,034		16			0.0%

Total borrowings	$	541,651	$	547,025	$	(5,374	)		(1.0%)

Borrowings are a less significant source of funding for WesBanco. During the first six months of 2011, WesBanco paid down Federal Home Loan Bank borrowings scheduled to mature utilizing funds provided by lower cost deposits or other available cash flows for their payoff. Additional maturities, including $50.0 million from the FHLB in the third quarter at 3.78%, are scheduled for the remainder of the year, which should permit a further lowering of the cost of wholesale borrowings as current borrowing rates are lower, or management will use available cash to pay off these borrowings.

Other short-term borrowings, which consist of federal funds purchased, securities sold under agreements to repurchase and treasury tax and loan notes were $208.7 million at June 30, 2011 as compared to $187.4 million at December 31, 2010. The increase in these borrowings has occurred primarily as a result of $15.0 million in federal funds purchased, coupled with a $5.4 million increase in securities sold under agreements to repurchase and a $0.9 million increase in treasury tax and loan notes. A $25.0 million revolving line of credit with another bank is available at the parent company. The revolving line of credit, which accrues interest at an adjusted LIBOR rate, provides for aggregate borrowings secured by a pledge of WesBanco’s banking subsidiary common stock of up to $25.0 million. There were no outstanding balances as of June 30, 2011 or December 31, 2010. The line is scheduled for ordinary renewal in the third quarter.

OFF-BALANCE SHEET ARRANGEMENTS

WesBanco enters into financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, letters of credit and affordable housing plan guarantees. Since many of these commitments expire unused or partially used, these commitments may not reflect future cash requirements. Please refer to Note 9, “Commitments and Contingent Liabilities,” of the Consolidated Financial Statements and the “Loans and Credit Risk” section of this MD&A for additional information.

CAPITAL RESOURCES

Shareholders’ equity was $623.0 million at June 30, 2011 compared to $606.9 million at December 31, 2010. Total equity increased due to net income during the current six month period of $22.2 million and a $1.7 million other comprehensive income gain. The increase was partially offset by the declaration of common shareholder dividends totaling $8.0 million. WesBanco also increased its quarterly dividend to $0.15 per share in February, a 7.1% increase over the prior quarterly rate.

On May 18, 2011, WesBanco granted 66,250 stock options to selected officers at an exercise price of $19.76. These options are service-based and vest 50% at December 31, 2011, and 50% at December 31, 2012. On the same date, WesBanco also granted 35,850 shares of restricted stock to selected officers. The restricted shares are service-based and vest 24 months from the date of grant.

WesBanco did not purchase any shares during the current three month period under an existing one million share repurchase plan. At June 30, 2011, remaining WesBanco common stock authorized to be purchased as part of the current one million share repurchase plan totaled 584,325 shares.

WesBanco is subject to regulatory promulgated leverage and risk-based capital guidelines that measure capital relative to risk-weighted assets and off-balance sheet instruments. WesBanco Bank (the “Bank”), as well as WesBanco maintain Tier 1, Total Capital and Leverage ratios well above minimum regulatory levels. There are various legal limitations under federal and state laws that limit the payment of dividends from the Bank to WesBanco. As of June 30, 2011, under FDIC regulations, WesBanco could receive, without prior regulatory approval, a dividend of up to $14.6 million from the Bank. WesBanco seeks to continue improving its consolidated and Bank capital ratios as short-term debt matures and is paid down from investment and loan cash flows, while also retaining a majority of its increasing earnings.

The following table summarizes risk-based capital amounts and ratios for WesBanco and the Bank for the periods indicated:


*(unaudited, dollars in thousands)*	Minimum Value⁽¹⁾	Well Capitalized ⁽²⁾	June 30, 2011					December 31, 2010
*(unaudited, dollars in thousands)*	Minimum Value⁽¹⁾	Well Capitalized ⁽²⁾	Amount		Ratio			Amount		Ratio

WesBanco, Inc.
Tier 1 Leverage	4.00%⁽³⁾	N/A	$	443,244		8.59	%	$	428,001		8.35	%
Tier 1 Capital to Risk-Weighted Assets	4.00%	6.00%		443,244		12.35	%		428,001		11.94	%
Total Capital to Risk-Weighted Assets	8.00%	10.00%		488,308		13.61	%		473,020		13.20	%

WesBanco Bank, Inc.
Tier 1 Leverage	4.00%	5.00%	$	408,461		7.94	%	$	398,171		7.80	%
Tier 1 Capital to Risk-Weighted Assets	4.00%	6.00%		408,461		11.45	%		398,171		11.15	%
Total Capital to Risk-Weighted Assets	8.00%	10.00%		453,268		12.71	%		443,013		12.41	%

⁽¹⁾	Minimum requirements to remain adequately capitalized.

⁽²⁾	Well capitalized under prompt corrective action regulations.

⁽³⁾	Minimum requirement is 3% for certain highly-rated bank holding companies.

DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT

On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which contains numerous and wide-ranging reforms to the structure of the U.S. financial system. Portions of the Dodd-Frank Act are effective at different times, and many of the provisions are general statements directing regulators to draft more detailed rules. Although the full scope of the Dodd-Frank Act’s impact remains somewhat unclear, management expects that it will, over time, reduce revenue and increase expenses.

As a bank holding company, WesBanco will be subjected to increased capital requirements (further discussed in WesBanco’s Form 10-K for the year ended December 31, 2010 filed with the SEC under “Item 1. Business—Capital Requirements”). A provision known as the Volcker Rule will limit WesBanco’s ability to engage in proprietary trading, as well as its ability to sponsor or invest in hedge funds or private equity funds. A provision known as the Lincoln Rule will prevent WesBanco Bank from engaging in certain swap transactions unless they are carried out through a separately capitalized affiliate. Increased restrictions also will apply to transactions with and among WesBanco subsidiaries, and the Federal Reserve Board will have increased authority to examine and take enforcement action against WesBanco and its subsidiaries that are not banks.

The Dodd-Frank Act makes several changes affecting the securitization markets, which may affect WesBanco’s ability or desire to use those markets to meet funding or liquidity needs. One of these changes calls for federal regulators to adopt regulations requiring the sponsor of a securitization to retain at least 5 percent of the credit risk, with exceptions for “qualified residential mortgages,” a term that regulators are in the process of defining.

As a publicly traded company, WesBanco is required to give shareholders an advisory vote on executive compensation, and, in some cases, golden parachute arrangements. The Dodd-Frank Act also calls for regulators to issue new rules relating to compensation committee independence, incentive-based compensation arrangements deemed excessive, and proxy access by shareholders.

WesBanco Bank and other insured depository institutions will have increased authority to open new branches across state lines. A provision authorizing insured depository institutions to pay interest on checking accounts will likely increase WesBanco’s interest expenses. A new government agency, the Bureau of Consumer Financial Protection (“Consumer Bureau”), will have the authority to write rules implementing numerous consumer protection laws applicable to all banks.

BASEL III CAPITAL AND LIQUIDITY STANDARDS

The federal regulatory authorities’ risk-based capital and liquidity guidelines are based upon agreements reached by the Basel Committee on Banking Supervision (the “Basel Committee”). The Basel Committee is a committee of central banks and bank supervisors and regulators from the major industrialized countries that develops broad policy guidelines for use by each country’s supervisors in determining the supervisory policies they apply. In December 2010, the Basel Committee issued a strengthened set of international capital and liquidity standards for banks and bank holding companies, known as “Basel III.” The Basel III reforms are supported by the U.S. federal banking agencies and will increase both the quantity and quality of capital banks and bank holding companies are required to hold. Regulators in each participating country will be expected to implement Basel III beginning January 1, 2013.

When Basel III is fully phased-in on January 1, 2019, banks and bank holding companies will be required to maintain: (i) a minimum Tier 1 common equity ratio of at least 4.5 percent, (ii) a minimum Tier 1 capital ratio of at least 6 percent, (iii) a minimum total capital ratio (Tier 1 and Tier 2 capital) of at least 8 percent; and (iv) a non-risk-based minimum leverage ratio (Tier 1 capital to average consolidated assets) of 3 percent. Although not presented as a minimum requirement, banks and bank holding companies will not be able to pay dividends unless they have an additional “capital conservation buffer” equal to a Tier 1 common equity ratio of 2.5 percent. Adding the capital conservation buffer on top of the minimums, banks and bank holding companies will generally need a Tier 1 common equity ratio of 7 percent, a Tier 1 capital ratio of 8.5 percent, and a total capital ratio of 10.5 percent. Under Basel III, regulators would also be able to impose a “countercyclical capital buffer” during periods of excessive credit growth. The countercyclical capital buffer would be an additional Tier 1 common equity ratio of up to 2.5 percent. Under Basel III, regulatory adjustments to common equity will generally be eliminated by January 1, 2018, although an exception will permit a portion of mortgage servicing rights to continue being treated as common equity.

Basel III also calls for new liquidity standards to help ensure adequate sources of funding are available in times of stress. When implemented, the liquidity coverage ratio is intended to measure the amount of high quality liquid assets that are available throughout a short-term period of stress lasting 30 days. The net stable funding ratio is intended to meet liquidity needs over a longer, 1-year period. To meet these standards, WesBanco and WesBanco Bank may need to invest a larger portion of their assets in liquid, lower yield instruments.

WesBanco cannot predict the precise timing or final form of forthcoming capital and liquidity regulations that could be applicable to WesBanco or their impact on WesBanco. Capital and liquidity requirements that may arise from regulations issued under the Dodd-Frank Act, Basel III, or some other initiative could increase the minimum capital or liquidity requirements applicable to WesBanco and its subsidiaries.

LIQUIDITY RISK

Liquidity is defined as a financial institution’s capacity to meet its cash and collateral obligations at a reasonable cost. Liquidity risk is the risk that an institution’s financial condition or overall safety and soundness is adversely affected by an inability, or perceived inability, to meet its obligations. An institution’s obligations, and the funding sources to meet them, depend significantly on its business mix, balance sheet structure, and the cash flows of its on- and off-balance sheet obligations. Institutions confront various internal and external situations that can give rise to increased liquidity risk including funding mismatches, market constraints on funding sources, contingent liquidity events, changes in economic conditions, and exposure to credit, market, operation, legal and reputation risk. WesBanco actively manages liquidity risk through its ability to provide adequate funds to meet changes in loan demand, unexpected outflows in deposits and other borrowings as well as to take advantage of market opportunities and meet operating cash needs. This is accomplished by maintaining liquid assets in the form of securities, sufficient borrowing capacity and a stable core deposit base. Liquidity is centrally monitored by WesBanco’s Asset/Liability Committee (“ALCO”).

WesBanco determines the degree of required liquidity by the relationship of total holdings of liquid assets to the possible need for funds to meet unexpected deposit losses and/or loan demands. The ability to quickly convert assets to cash at a minimal loss is a primary function of WesBanco’s investment portfolio management. Federal funds sold and U.S. Treasury and government agency securities maturing within three months are classified as secondary reserve assets. These secondary reserve assets, combined with the cash flow from the loan portfolio and the remaining sectors of the investment portfolio, and other sources, adequately meet the liquidity requirements of WesBanco.

Securities are the principal source of short-term liquidity for WesBanco. Securities totaled $1.5 billion at June 30, 2011, of which $938.3 million were classified as available-for-sale, including net unrealized pretax gains of $11.0 million. The remaining securities were classified as held-to-maturity. At June 30, 2011, WesBanco has approximately $16.7 million in securities scheduled to mature within one year; however, additional cash flows may be anticipated from approximately $394.2 million in callable bonds which have call dates within the next year, from projected prepayments on mortgage-backed securities and collateralized mortgage obligations of approximately $161.8 million based on current prepayment speeds, from loans held for sale totaling $4.2 million, from accruing loans scheduled to mature within the next year of $515.8 million and from normal loan repayments anticipated to be $681.9 million within the next year. At June 30, 2011, WesBanco had $83.3 million of cash and cash equivalents, which serves as operating cash for the branches and an additional source of liquidity. Sources of liquidity within the next year listed above approximate $1.9 billion at June 30, 2011.

Deposit flows are another principal factor affecting overall WesBanco liquidity. Deposits totaled $4.2 billion at June 30, 2011. Deposit flows are impacted by current interest rates, products and rates offered by WesBanco versus various forms of competition, as well as customer behavior. Certificates of deposit scheduled to mature within one year totaled $797.8 million at June 30, 2011 which includes jumbo regular certificates of deposit and jumbo CDARS^© deposits totaling $196.8 million with a weighted-average cost of 1.27% and $114.4 million with a cost of 1.31%, respectively. In addition to the historically relatively stable core deposit base, WesBanco maintains a line of credit with the FHLB as an additional funding source. Available lines of credit with the FHLB at June 30, 2011 approximated $960.9 million in excess of current outstandings, which has decreased slightly from the $1.0 billion available at December 31, 2010, due to changes in certain loan balances and FHLB changes in collateral discounts. At June 30, 2011, the Bank had unpledged available-for-sale securities with an amortized cost of $494.5 million, a portion of which is an available liquidity source, or could be pledged to secure additional FHLB borrowings. In addition, WesBanco participates in the Federal Reserve Bank’s Borrower-in-Custody Program (“BIC”) whereby WesBanco pledges certain consumer loans as collateral for borrowings. At June 30, 2011, WesBanco had a BIC line of credit totaling $139.6 million, none of which was outstanding. Alternative funding sources may include the utilization of existing overnight lines of credit with third party banks totaling $145.0 million of which $15.0 million was outstanding at June 30, 2011 along with seeking other lines of credit, borrowings under repurchase agreement lines, increasing deposit rates to attract additional funds, accessing brokered deposits, or selling securities available-for-sale or certain types of loans.

Other short-term borrowings of $208.7 million at June 30, 2011 primarily include callable repurchase agreements of $190.5 million and several overnight sweep checking accounts for large commercial customers. There has not been a significant fluctuation in the average deposit balance of these overnight sweep checking accounts during 2011. The repurchase agreements require securities to be pledged equal to or greater than the instrument’s purchase price and may be called within the next year. The overnight sweep checking accounts require securities to be pledged equal to or greater than the deposit balance. In the third quarter new regulatory guidelines will permit for the first time the payment of interest on certain corporate checking accounts. WesBanco has not yet determined how this might impact sweep account and related deposit account balances.

In July 2009, the FHLB began requiring securities to be specifically pledged to the FHLB and maintained in a FHLB approved custodial arrangement if the member wishes to include such securities in the maximum borrowings capacity calculation. WesBanco has elected not to specifically pledge to the FHLB otherwise unpledged securities. To increase its remaining capacity, WesBanco can at any time decide to pledge a portion of its unpledged securities to the FHLB.

The principal sources of parent company liquidity are dividends from the Bank, $21.9 million in cash and investments on hand, and a $25 million revolving line of credit with another bank, which did not have an outstanding balance at June 30, 2011. WesBanco is in compliance with all loan covenants. There are various legal limitations under federal and state laws that limit the payment of dividends from the Bank to the parent company. As of June 30, 2011, under FDIC and state of West Virginia regulations, WesBanco could receive, without prior regulatory approval, dividends totaling $14.6 million from the Bank.

At June 30, 2011, WesBanco had outstanding commitments to extend credit in the ordinary course of business approximating $717.4 million, compared to $648.8 million at December 31, 2010. On a historical basis, only a small portion of these commitments will result in an outflow of funds. Please refer to Note 9, “Commitments and Contingent Liabilities,” of the Consolidated Financial Statements and the “Loans and Credit Risk” section of this MD&A for additional information.

Federal financial regulatory agencies recently issued guidance to provide sound practices for managing funding and liquidity risk and strengthening liquidity risk management practices. The guidance recommends that financial institutions maintain a comprehensive management

process for identifying, measuring, monitoring, and controlling liquidity risk and that liquidity risk management be fully integrated into its risk management process. WesBanco has completed the implementation of these policies, and management believes WesBanco has sufficient current liquidity to meet current obligations to borrowers, depositors and others as of June 30, 2011 and that WesBanco’s current liquidity risk management policies and procedures adequately address the recently issued guidance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosures set forth in this item are qualified by the section captioned “Forward-Looking Statements” included in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report.

MARKET RISK

The primary objective of WesBanco’s ALCO is to maximize net interest income within established policy parameters. This objective is accomplished through the management of balance sheet composition, market risk exposures arising from changing economic conditions and liquidity risk.

Market risk is defined as the risk of loss due to adverse changes in the fair value of financial instruments resulting from fluctuations in interest rates and equity prices. Management considers interest rate risk to be WesBanco’s most significant market risk. Interest rate risk is the exposure to adverse changes in net interest income due to changes in interest rates. The relative consistency of WesBanco’s net interest income is largely dependent on effective management of interest rate risk. As interest rates change in the market, rates earned on interest rate sensitive assets and rates paid on interest rate sensitive liabilities do not necessarily move concurrently. Differing rate sensitivities may arise because fixed rate assets and liabilities may not have the same maturities, or because variable rate assets and liabilities differ in the timing and/or the percentage of rate changes.

WesBanco’s ALCO, comprised of senior management from various functional areas, monitors and manages interest rate risk within Board approved policy limits. Interest rate risk is monitored primarily through the use of an earnings simulation model. The model is highly dependent on various assumptions, which change regularly as the balance sheet and market interest rates change. The key assumptions and strategies employed are analyzed bi-monthly and reviewed and documented by the ALCO.

The earnings simulation model projects changes in net interest income resulting from the effect of changes in interest rates. Forecasting changes in net interest income requires management to make certain assumptions regarding loan and security prepayment rates, bond call dates, and adjustments to non-maturing deposit rates, which may not necessarily reflect the manner in which actual yields and costs respond to changes in market interest rates. Assumptions used are based primarily on historical experience and current market rates. Security portfolio maturities and prepayments are assumed to be reinvested in similar instruments and callable bond forecasts are adjusted at varying levels of interest rates. While management believes such assumptions to be reasonable, there can be no assurance that assumed prepayment rates, callable bond forecasts and non-maturing deposit rates will approximate actual future results. Moreover, the net interest income sensitivity chart presented in Table 1, “Net Interest Income Sensitivity,” assumes the composition of interest sensitive assets and liabilities existing at the beginning of the period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve, regardless of the duration of the maturity or re-pricing of specific assets and liabilities. Since the assumptions used in the model relative to changes in interest rates are uncertain, the simulation analysis may not be indicative of actual results. In addition, the analysis may not consider all actions that management could employ in response to changes in interest rates and various earning asset and costing liability balances.

Management is aware of the significant effect inflation or deflation has upon interest rates and ultimately upon financial performance. WesBanco’s ability to cope with inflation or deflation is best determined by analyzing its capability to respond to changing market interest rates, as well as its ability to manage the various elements of noninterest income and expense during periods of increasing or decreasing inflation or deflation. WesBanco monitors the level and mix of interest-rate sensitive assets and liabilities through ALCO in order to reduce the impact of inflation or deflation on net interest income. Management also controls the effects of inflation or deflation by conducting periodic reviews of the prices and terms of its various products and services, both in terms of the costs to offer the services as well as outside market influences upon such pricing, by introducing new products and services or reducing the availability of existing products and services, and by controlling overhead expenses.

Interest rate risk policy limits are determined by measuring the anticipated change in net interest income over a twelve month period assuming an immediate and sustained 100 and 200 basis point increase or decrease in market interest rates as compared to a stable rate environment or base model. WesBanco’s current policy limits this exposure to a reduction of 5.0% and 12.5% or less, respectively, of net interest income from the base model over a twelve month period. The table below shows WesBanco’s interest rate sensitivity at June 30, 2011 and December 31, 2010 assuming both a 100 and 200 basis point interest rate change, compared to a base model. Due to the current low interest rate environment, particularly for short-term rates, the 200 basis point decreasing change is not calculated, and instead a 300 basis point rising rate environment is shown. The policy limit for an increasing 300 basis point rising rate environment is a negative 25%.

TABLE 1. NET INTEREST INCOME SENSITIVITY


Immediate Change in Interest Rates (basis points)	Percentage Change in		ALCO Guidelines
	Net Interest Income from Base over One Year
	June 30, 2011	December 31, 2010

+300	(0.6%)	0.8%	-25.0%
+200	0.6%	1.7%	- 12.5%
+100	1.2%	2.4%	- 5.0%
-100	(3.7%)	(2.9%)	- 5.0%
-200	N/A	N/A	-12.5%

As per the table above, the earnings simulation model at June 30, 2011 currently projects that net interest income for the next twelve month period would decrease by 3.7% if interest rates were to fall immediately by 100 basis points, compared to a decrease of 2.9% for the same scenario as of December 31, 2010.

For rising rate scenarios, net interest income would increase by 1.2%, 0.6% and decrease by 0.6% if rates increased by 100, 200 and 300 basis points, respectively, as of June 30, 2011 as compared to increases of 2.4%, 1.7% and 0.8% in a 100, 200 and 300 basis point increasing rate environment as of December 31, 2010. The balance sheet is slightly less asset sensitive in the second quarter of 2011 due to changes in deposit mix and a slight duration extension in the investment portfolio. Should rates rise more rapidly and by a higher amount, the asset sensitivity is somewhat neutralized due to slower anticipated prepayment speeds and extension risk associated with residential mortgages and mortgage-backed securities. In addition, variable rate commercial loans with rate floors approximated $911.9 million at June 30, 2011, which represented approximately 42% of commercial loans with an average floor of 5.18%. In the current flat interest rate environment, WesBanco expects that the net interest margin may be slightly negatively impacted throughout the rest of 2011, as short term interest rates are not anticipated to increase until mid to late 2012, and loan runoff and investment security maturities are reinvested at lower rates.

The Bank has significant additional borrowing capacity with the FHLB of Pittsburgh, the Federal Reserve Bank of Cleveland, and various correspondent banks, and may utilize these funding sources as necessary to mitigate the impact on our balance sheet of embedded options in commercial and residential loans and to lengthen liabilities to help offset mismatches in various asset maturities. CDARS^© deposits have also been used to lengthen maturities in certificates of deposit. Various derivative strategies may also be employed to enhance asset sensitivity in a rising rate environment, including loan level interest rate swaps for certain of our commercial loan customers, although such strategies would most likely result in a decrease to net interest income in the short term in order to improve net interest income in a longer term rising rate environment.

As an alternative to the immediate rate shock analysis, the ALCO monitors interest rate risk by ramping or increasing interest rates 200 basis points gradually over a twelve month period. WesBanco’s current policy limits this exposure to 5.0% of net interest income from the base model for a twelve month period. Management believes that the ramping analysis reflects a more realistic movement of interest rates, whereas the immediate rate shock reflects a less likely scenario. The simulation model at June 30, 2011, using the 200 basis point increasing rate ramp analysis, projects that net interest income would increase 1.5% over the next twelve months, compared to a 2.3% increase at December 31, 2010.

WesBanco also periodically measures the economic value of equity, which is defined as the market value of equity in various increasing and decreasing rate scenarios. At June 30, 2011, the market value of equity as a percent of base in a 200 basis point rising rate environment indicates an increase of 1.9% as compared to an increase of 4.4% at December 31, 2010. In a 100 basis point falling rate environment, the model indicates a decrease of 5.6%, as compared to a decrease of 4.1% as of December 31, 2010. WesBanco’s policy is to limit such change to minus 25% for a 200 basis point change in interest rates, as long as the Tier I capital leverage ratio is not forecasted to decrease below 5.0% as a result of the change.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES— WesBanco’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) have concluded that WesBanco’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this Form 10-Q, are effective at the reasonable assurance level as discussed below to ensure that information required to be disclosed by WesBanco in the reports it files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to WesBanco’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS— WesBanco’s management, including the CEO and CFO, does not expect that WesBanco’s disclosure controls and internal controls will prevent all errors and all fraud. While WesBanco’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objective, no control system, no matter how well conceived and operated, can provide absolute assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

CHANGES IN INTERNAL CONTROLS—There were no changes in WesBanco’s internal control over financial reporting that occurred during our fiscal quarter ended June 30, 2011 as required to be reported by paragraph (d) of Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, that materially affected, or are reasonably likely to materially affect, WesBanco’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

WesBanco is involved in lawsuits, claims, investigations and proceedings which arise in the ordinary course of business. There are no such matters pending that WesBanco expects to be material in relation to its business, financial condition or results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As of June 30, 2011, WesBanco had a current stock repurchase plan in which up to one million shares can be acquired. The plan was originally approved by the Board of Directors on March 21, 2007 and provides for shares to be repurchased for general corporate purposes, which may include a subsequent resource for potential acquisitions, shareholder dividend reinvestment and employee benefit plans. The timing, price and quantity of purchases are at the discretion of WesBanco, and the plan may be discontinued or suspended at any time. There were no general open market repurchases during the second quarter of 2011, other than those for KSOP and dividend reinvestment plans.

The following table presents the monthly share purchase activity during the quarter ended June 30, 2011:


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares that May Yet Be Purchased Under the Plans

Balance at March 31, 2011								584,325

April 1, 2011 to April 30, 2011
Open market repurchases		-		-		-		584,325
Other transactions (1)		19,335	$	20.60		N/A		N/A

May 1, 2011 to May 31, 2011
Open market repurchases		-		-		-		584,325
Other transactions (1)		3,100	$	19.99		N/A		N/A

June 1, 2011 to June 30, 2011
Open market repurchases		-		-		-		584,325
Other transactions (1)		3,339	$	19.20		N/A		N/A
Second Quarter 2011
Open market repurchases		-		-		-		584,325
Other transactions (1)		25,774	$	20.35		N/A		N/A
Total		25,774	$	20.35		-		584,325

(1) Consists of open market purchases transacted in the KSOP and dividend reinvestment plans.

ITEM 6. EXHIBITS


31.1		Chief Executive Officer’s Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Chief Financial Officer’s Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Chief Executive Officer’s and Chief Financial Officer’s Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from WesBanco’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, (ii) the Consolidated Statements of Income for the three and six months ended June 30, 2011 and 2010, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2011 and 2010, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text.*

*Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		WESBANCO, INC.

Date: July 28, 2011		/s/ Paul M. Limbert
		Paul M. Limbert
		President and Chief Executive Officer (Principal Executive Officer)

Date: July 28, 2011		/s/ Robert H. Young
		Robert H. Young
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)