Earnings Labs

First Commonwealth Financial Corporation (FCF)

Q3 2012 Earnings Call· Wed, Oct 24, 2012

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Transcript

Operator

Operator

Good day and welcome to the First Commonwealth Financial Corporation’s Third Quarter 2012 Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Richard Stimel, Communications Manager. Mr. Stimel, the floor is yours, sir.

Rich Stimel

Analyst

Thank you. As a reminder, a copy of today’s earnings release can be accessed by logging on to fcbanking.com and selecting the Investor Relations link at the top of the page and then selecting News on the left side of the page under News and Market Data. We’ve also included a slide presentation on our Investor Relations page with supplemental financial information that we’ll reference throughout today’s call. With me in the room today are Mike Price, President and CEO of First Commonwealth Financial Corporation; Bob Rout, Executive Vice President and Chief Financial Officer; and Bob Emmerich, Executive Vice President and Chief Credit Officer. After brief comments from management, we will open the call to your questions. For that portion of the call, we’ll be joined by Mark Lopushansky, our Chief Treasury Officer. Before we begin, I’d like to caution listeners that this conference call will contain forward-looking statements about First Commonwealth, its business, strategies and prospects. Please refer to our forward-looking statements disclaimer on page 2 of the slide presentation for a description of risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. And now, I’d like to turn the call over to Mike Price.

Michael T. Price

Analyst

Thanks, Rich, and good afternoon, everyone. And thanks for taking the time to join us on today’s call. After 2 quarters of solid traction on multiple fronts, the third quarter was somewhat disappointing. We made $0.09 per share, some $0.03 less on a linked-quarter basis, driving earnings down were a provision expense that was up some $2.5 million over the average of the prior 2 quarters in an external fraud that led to a loss of $3.5 million. We’re pursuing the legal recovery of those funds and we filed insurance claims as well. Net interest margin was down some 7 basis points. On the plus side of the ledger, we continued our momentum with lending and now have grown loans over 6% during the last 12 months and for each of the last 4 quarters. Loan growth year-to-date is driven in large part by our retail bank. And on the corporate side, new production is equally yoked between our large corporate or participation portfolio and our middle market and direct-lending areas. Along with good loan growth, we’ve also seen progress with our non-interest bearing deposits and some improving credit quality. As you think about First Commonwealth in the future, I would draw your attention to 2 strategic themes that I’ve discussed in the last 2 calls. First, we want to be the best bank for businesses and their employees among our community bank competitors. We are winning customers in the trenches both small businesses and middle market clients. In addition to our regular calling efforts, our team members participate in business blitzes each month. And the discipline around these blitzes just in this past year has resulted in over 6,000 calls through 9 months. As a part of delivering the best financial solutions to the businesses and their employees, we’ve…

Bob Rout

Analyst

Thank you, Mike, and good afternoon, everyone. As Mike just mentioned, we believe the organization is making great progress on the fundamentals of community banking. Loan and core deposit growths are now reflecting our strategic efforts in these areas over the last couple of years with $54 million of growth in loans this past quarter. Credit issues are fast approaching at a more normalized level, here too, we are benefiting from a long-term strategic focus in credit administration that we believe will be a competitive advantage going forward. Especially, noteworthy, is the downward trend in our credit size and classified assets despite some fluctuations in the non-performing numbers this quarter that Bob Emmerich will be discussing. Progress on efficiency has been steady despite the noise from credit cleanup cost and external frauds; thus far that progress has been incremental. As Mike mentioned, we are seriously rethinking our legacy IT strategy that could provide more transformative type opportunities in this area. With credit and core earnings now approaching a more consistent trend, stock buyback programs, increased dividends and good organic growth are helping to manage down the excess capital that we build up during more troubled times. There is no doubt that net interest margins will be an important performance factor for our bank, but for the industry as a whole. That better reserves efforts to drive down long-term rates in order to salvage a very weak economic recovery is working. At least the down rates part is working the jury is still out on the recovery phase. Reinvestment yields on our investments in loans are coming down much quicker than we can pull down funding cost especially with our overall cost of the deposits now at 42 basis points. Our net interest margin has been contracting 5 to 7 basis…

Bob Emmerich

Analyst

Thank you, Bob. As you are aware First Commonwealth has made substantial improvements in asset quality over the last year. We continue to work on resolutions for our handful of legacy problem assets that we still have on the books. In the third quarter, we did not reach conclusion on any of those assets. However, asset quality metrics remain in line with the median of our peer banks and we continue to have favorable year-over-year comparison for credit cost. The Bank did see a $9 million increase in non-performing loans in the third quarter going from $84.9 million to $93.9 million, which equated to 2.23% of total loans compared to 2.04% at June 30. There were 3 primary reasons for the increase; first, the bank began taking more aggressive stance on loans 90 days past due and still accruing interest, as a result we moved $4.8 million of loans in this category to nonaccrual. These were primarily residential real estate loans, 150 days or more past due. Second, the bank placed on nonaccrual a $6.7 million loan to a Western Pennsylvania nonprofit entity that operates a general inpatient care facility. The bank also placed a nonaccrual of $2.8 million loan to a Western Pennsylvania construction firm. During the third quarter, we did have the following decreases: first, the bank took charge-offs of $1,425,000 and $326,000 on 2 of the remaining BankFirst, Marshall Bank participations to recognize the offering prices of letters of intent for possible note sales. These 2 notes have not been moved to the Held-for-Sale category due to the prior core history of concluding sale transaction and the bank groups continue to work down a dual path of foreclosure. Second, the bank was paid out by a refinance of $1.3 million lot development loan that was placed in…

Michael T. Price

Analyst

And with that, we would love to answer your questions and be helpful where we can.

Operator

Operator

[Operator Instructions] And the first question we have comes from Bob Ramsey of FBR.

Bob Ramsey

Analyst

You know, Mike, I kind of missed it, but in your introductory comments you’ve mentioned as part of the changes you all are working on getting to a $40 million number and I just -- I missed what exactly you were talking to there. Could you give me the detail?

Michael T. Price

Analyst

Yes. Just 2 things I mentioned is just kind of the incremental and getting after the -- we’ve really been grinding on departmental budgets, open positions, things like that, but then the more transformative opportunity I think is, we’re looking closely at our branch network and where we might combine some branches. And then additionally, we’re really looking pretty comprehensive review of the state of our technology with the help of a third party kind of determining what technologies should be maintained, upgraded, replaced, identifying gaps between kind of current practices, industry best practice and really specifying where we can simultaneously save money and get better and deliver better. And then really looking along, and Bob and I both mentioned technology where we might renegotiate a contract. So that’s more transformative. It will take some time and we are pretty deep into a project that really began in the third quarter there.

Bob Ramsey

Analyst

Okay. And I know you mentioned that though you guys are trying to get there as quickly as possible, but then also mentioned that some of those changes maybe the more transformative ones will take until 2014. I mean is it sort of -- can you get little improvement in next couple of quarters and then sort of towards the end of next year, you come down to that level and is there growth in other areas that sort of offsets some of that or how are you thinking about the trajectory?

Bob Rout

Analyst

Well, this is Bob Rout. I will take a shot at that. Our non-interest expense has just been a plain mess in the last couple of years with all of the credit cleanup costs with some of the corporate restructurings that we’ve done with respect to the executive management team and also more recently this fraud that we came across. When we strip all of that stuff out, we think we’re getting that core trend below the $160 million number, $160 million or $40 million a year (sic) [quarter]. And that core number really all depends on how much of that credit cleanup and collection cost you think are core going forward. So all of those unusual activities is really blurring some fairly good progress that we’re making on the infrastructure, while at the same time, we’ve done heavy investments within both our lending and other business relationship type areas sort of shipping cost away from the support areas into more the lines of business. So worldwide, I think we’re already there, it’s just not showing up in the numbers because the unusual items that you see will pop up here every quarter.

Bob Ramsey

Analyst

Okay. And then on the credit fine, I know, you guys have highlighted too in the release the reclassification of some resi loans. Was that related to the regulatory guidance for bankruptcy cases or was this a different issue where you all had some reclassifications going on?

Bob Rout

Analyst

Well, I’ll jump in first, again, it’s Bob Rout. No, it wasn’t related to that new guidance, it was really only our desire to maybe be a little more aggressive on those loans. We have a mortgage loan that’s greater than 150 days, it’s really hard to make the argument that is in the process of coming back just because Wall collateralized. And it gives us -- and by taking that more strict approach to classifying those type of loans, it allows us to keep a better eye on them. Bob Emmerich, would you, if you wanted to touch base, no?

Bob Emmerich

Analyst

No, I don’t have anything else to add to that, Bob. No.

Bob Rout

Analyst

Well, it certainly really our thought process. No one has forced that on us.

Bob Ramsey

Analyst

Yes. That’s helpful. And then how, I know, you guys sort of have expressed a little bit of frustration with the volatility in credit this quarter, but how should we be thinking about the provision line going forward, I mean, what is kind of -- are charge-offs the key factor there, is it the new non-performing loans, the 2 new loans that moved into non-performing that drove the outsized provision or what are the big things to keep an eye on?

Bob Emmerich

Analyst

It was largely the 2 loans that we put it in nonaccrual this month or at this quarter that caused the provision to be higher than what it had been in the last 2 quarters.

Bob Ramsey

Analyst

Okay. Did you all say how much of the provision related to these 2 loans?

Bob Emmerich

Analyst

We did not. And we probably -- we’d like to get away for the practice of identifying reserves to each loan because a lot of these loans then become recognizable to our customers and that’s not the information we really want to get out.

Operator

Operator

And the next question we have from Damon DelMonte, KBW.

Damon Del Monte

Analyst

I was just wondering could you guys comment on your outlook for the sustainability of the loan growth. I know you’ve seen good growth 4 consecutive quarters in a row and kind of how is the pipeline looking and what is your outlook for the upcoming few quarters?

Michael T. Price

Analyst

It’s pretty good. I’m just reviewing today, I mean, just kind of going through the different portfolios. The branch portfolio to include kind of the HELOAN, HELOC really on pace for a record year for us and the pipeline looks pretty consistent with what it has been over the last couple quarters. On the commercial side, I would highlight small business. We’ve made quite an investment there and that has indeed picked up and we’re seeing after really -- not a lot of movement in the first 3 to 6 months probably getting annualized there at 4% plus, which is a nice pickup. And on the commercial side, pretty equally yoked there between participations in some larger corporate loans and then also some middle market loans now as we look at the numbers in both units and dollars. And so pretty positive that we can continue kind of that 5% to 6% growth quarter-to-quarter, there may be a little fluctuation with a large pay off or maybe in one quarter we won’t get any payoffs. And I would also share that that despite some continued deleveraging with some larger loans because we have very thoughtfully over the last 7, 8 quarters continued to work that down in both number of loans and aggregate exposure. And then as you know, we have the mortgage headwind, that’s lessening a little bit each year as that portfolio kind of liquidates. So, still pretty good about that and how the business is touching down with business customers in our branches.

Damon Del Monte

Analyst

Okay. And did you -- I mean, the corporate finance portfolio that continues to prove good opportunities for you guys as well?

Michael T. Price

Analyst

It does. I mean, that portfolio has a cap on it, as you and I have discussed, but what we’re seeing is a lot, as you know, a lot of private equity firms are really buying up companies, so really the entrée is through a participation even a local company and it gives us -- it seems like the pricing on those loans, because they clear a little broader market perhaps it’s a little buoyed versus the same kind of direct loan. And unusually and most of ours are right in our backyard, so more than our fair share well over a half are very kind of relationship-oriented where we have treasury management; in one case, we have a branch in the corporate headquarters. So that’s a business that -- and the credit quality through the cycle has been good. So it’s a business that we’ve managed well here the last few years.

Damon Del Monte

Analyst

Okay, great. I appreciate that color. Regarding the fraud for this quarter, I know, you don’t want to get into too much granularity and specifics, but can you give us a little indication as to was it a single event, was it more broad based and it was discovered or what can you tell us about it?

Michael T. Price

Analyst

Good questions. I mean, it was a single event with a single client whose system had been violated and that’s probably enough. I’m getting a lot of no-no’s here.

Damon Del Monte

Analyst

And I guess it’s my last question probably for Bob about non-performers, what was the total amount of new non-performing loans that came in this quarter?

Bob Emmerich

Analyst

It was $9 million.

Damon Del Monte

Analyst

$9 million. Okay, so it’s primarily just by those 2 credits that you discussed?

Bob Emmerich

Analyst

Yes.

Operator

Operator

The next question comes from Mac Hodgson of SunTrust Robinson Humphrey.

Mac Hodgson

Analyst

A couple of questions. Maybe first on the buyback, I was expecting a little bit more in repurchases during the quarter. Can you maybe walk me through your thought process on how much you want to deploy, is this a relatively decent run rate, that type of thing?

Bob Rout

Analyst

Hi, it’s Bob Rout. Yes, the buyback is going well, we have set out some price parameters where we don’t want to be pushing the price of that stock up, and of course you also have your 10b-18 Guidelines too on volumes and to be quite honest the volume on Bank stocks appear to be kind of muted here in the last couple of quarters for a variety of reasons. So we are buying as much as we can, we have $50 million out there as an authorization and it will be our intent to satisfy that whole target of $50 million.

Mac Hodgson

Analyst

Is there any expiration or $50 million until it’s completed?

Bob Rout

Analyst

Currently, it goes to the end of the year and then we’ll reevaluate and discuss with our board and see if we need to do more if it’s necessary.

Mac Hodgson

Analyst

Okay, so realistically you have to renew it and extend it through next year?

Bob Rout

Analyst

Well, we can renew and extend it the next -- the whole year doesn’t have to be an issue. The other thing that -- we have ample capital right now and we are really keeping a close eye on these Basel III proposed rules, how they are going to finally fall out and we keep running scenarios on how that might affect our own position as well too. So until we get some clarity on there I think we’re comfortable with $50 million at this time.

Mac Hodgson

Analyst

Okay. On expenses and the $40 million target, if I take out the fraud charge this quarter and maybe take down some of the collection repossession expenses, you’re almost at $40 million. And so are some of the initial initiatives related to head count branches more to act as offsets to normal expense increases or is the goal to get it more below that $40 million mark?

Bob Rout

Analyst

We are definitely going for below $40 million mark.

Mac Hodgson

Analyst

Okay. And then could you give any color on the termination fee related to the mortgage banking joint venture? I am not sure I understand really what’s going on there? Why you see the fee for the cancellation of that?

Michael T. Price

Analyst

Yes, we had entered into an agreement probably about 2005 -- 2006 when we had exited the mortgage business with a large bank. And it was a JV, an arrangement and I think we had a longer-term contract, I think it was 10 years and I think we both were mutually reaching an agreement that it was, it was time to and what really wasn’t working out and, and part of that agreement if whoever gave notice first had a breakage fee.

Mac Hodgson

Analyst

Got you, okay. Is there going to be any sort of offset in income or expenses that we’ll see going forward, like would you have less fee income as a result of termination of that or?

Michael T. Price

Analyst

I wish I could say, yes. No, it wasn’t material. It was couple of hundred grand a year, in a great year. So it wasn’t making a whole lot of rain for us.

Mac Hodgson

Analyst

Got you. And then, one just last one. What was the $1.7 million related to improved credit risk on the swap portfolio. Could you explain that?

Bob Rout

Analyst

Yes. We have I believe about $220 million of swaps outstanding for their commercial line customers where we have entered into arrangements where they can acquire fixed rate because we see a variable rate, which we do like a lot for balance sheet purposes. As part of your quarterly assessment you are going through, there is swap arrangements to make sure that you properly reflected the credit exposure which you have with those arrangements, and book a reserve appropriately. Last year this time, we had 2 large real estate loans that had a swap on that we eventually took some sizable charge-offs related to, and we also had to put some extra reserves aside, credit wise for their respective swaps as well. So that loan has either been -- has been restructured into an AV note, the charge-offs have happened, we unwound the swaps and as a result of that it’s just a much better credit profile for our whole swap portfolio than what we had last year at this time.

Bob Rout

Analyst

Mac, you also had a question that you had emailed earlier about the elimination of the TAG program on the unlimited insurance coverage related to DDA accounts and just talking with our people out in the field in our corporate cash management. We’re not hearing this been a big subject with our customers and the other fact is less than 1% of our total corporate DDA is really reflective of those type of arrangements where they might have balances in excess of the $250,000 coverage. So, I want to make sure that I got back to you on that question.

Operator

Operator

Next we have Collyn Gilbert of Stifel, Nicolaus.

Collyn Gilbert

Analyst

Thanks. Good afternoon guys. Just a question around the construction growth that you saw this quarter, can you just talk a little bit about the activity that you are seeing in the markets kind of your expectation for where that portfolio can go? And then, I was just curious about the construction credit that came on whether you charged off this quarter when that was originated?

Michael T. Price

Analyst

Okay, well Bob will get to you on that, but we’re seeing just a palpable uptick in some commercial real estate and construction opportunity. And I’m just looking at the list of approvals here in the last few quarters and most of it will be like a build out for a high quality single tenant, a couple of those and actually sewage treatment facility and just kind of garden variety, back of the yard kind of stuff.

Collyn Gilbert

Analyst

Okay. So, mostly on the commercial real estate side, not residential? Okay, are you seeing any pick up in residential construction?

Michael T. Price

Analyst

We’re not and we don’t with our JV and we didn’t do residential construction.

Collyn Gilbert

Analyst

Okay. Okay. And then just one final thing, you guys have done a great job in kind of growing fee income this year. So do you think that momentum can continue for next year or how are you thinking about that side of the P&L?

Michael T. Price

Analyst

What we do, it really goes to just systemic household growth. And we’re putting on a lot of nice, new consumers and small business households. And those good people pay us fees and so we seem to be taking share and really growing at some nice rates, particularly in metro of Pittsburgh. That market has really been good to us.

Bob Rout

Analyst

Collyn, I don’t know if we answered your question about the construction charge offs that is showed on the slide, is the $1.987 million. Most of that are the 2 charge offs, I mentioned, the $1.425 million is the non-performing loan, #5 where we took a write-down to reflect a Letter of Intent offer for the note and the other one was $326,000 for a land development project in Nevada.

Collyn Gilbert

Analyst

Okay. Do you know roughly when these originated?

Bob Rout

Analyst

They originated in 2008. They were both part of the Marshall Bank portfolio.

Operator

Operator

Next we have John Moran of Macquarie Capital.

John Moran

Analyst

Just real quick kind of 2 ticky-tack questions on the NIM. Bob I think you had mentioned some CD re-pricing, could you quantify how much is kind of rolling over the next couple of quarters and a what rate?

Bob Rout

Analyst

I don’t have it in my finger tips, but we’ll look forward and then get back to you before the conference is over.

John Moran

Analyst

Okay. That’d be helpful. And, then on the securities book, I’m sorry if I missed it in the prepared remarks, but do you have duration handy or even easier or better would be how much actually rolls next year?

Bob Rout

Analyst

I think that the duration is been holding fairly steady. It -- right now we’re about 3.46 on the entire portfolio….

Michael T. Price

Analyst

Yes, 3.5 and that includes our $100 million truck portfolio that we have. If we strip that out, we’re probably very short of maybe 2.6.

John Moran

Analyst

Okay. That is helpful. Then just a quick question I guess for Bob Emmerich on the larger sort of chunkier NPLs, I know that you said, I think you just mentioned on credit #5 there is an LOI on the note there, is there any other kind of -- sort of progress on some of the larger ones here, are we moving toward resolution on anything or anything that you guys could share there?

Bob Emmerich

Analyst

Yes, as I mentioned, we continue to work on resolutions to these and we may have something in the fourth quarter, but I really hate to set up expectations around this. And the other loan is #6, we’ve got a $900,000 pay down on that loan. So we’re making progress on that. But nothing, I really don’t think I can share with you.

Bob Rout

Analyst

Okay, John, just to get back to you on the CD question. It looks like we have about $800 million coming -- maturing next year with average price about 48 basis points. So a little bit of room there, not a lot.

John Moran

Analyst

Okay. So it’s 48 basis points of yield pickup or the current price that you’re paying on the $800 million is 48 basis?

Bob Rout

Analyst

Current price.

Operator

Operator

Next we have Matthew Breese of Sterne Agee.

Matthew Breese

Analyst

Getting back to your the provision, I think you guys had mentioned that you felt like credit was approaching a more normalized level. As it relates to provision does that mean we can expect the provision to kind of track back down to a normalized level as well?

Michael T. Price

Analyst

Well, I think in terms of charge-offs we’ve been running pretty consistent on charge-offs in that $3 million to $5 million a quarter and you’ll need to cover your charge-offs. But as we have new impaired loans, pop up from time-to-time we’ve got to make a reserve assessment for them and then on top of that as the portfolio grows, and we do have plans for growth in the portfolio, we will have to add to the reserve or provision expense just to cover the growth in the portfolio, that’s not something we want to lose sight of, we haven’t seen that. The need to do that recently because of the contraction in the portfolio, but if it turns around and starts growing we would have to try and cover the growth as well.

Matthew Breese

Analyst

So, it sounds like near-term it could be, it remained lumpy and further out as portfolio continues to grow and credit subsides, it will normalize, is that a fair way of thinking about it?

Michael T. Price

Analyst

Yes. I’m afraid. I wish the provision expense could be very consistent, but it’s not. It does end up being a little bit lumpy.

Matthew Breese

Analyst

Okay. Maybe stepping back a little bit, you guys, I know, are involved in the energy lending side of things, especially with the Marcellus shale going on, little color on that? And then, there was an article in front page of the journal this morning related to Beaver County, and your chemical plant out there, just sounds like things are picking up on the natural gas front, just looking for color?

Michael T. Price

Analyst

Yes, the color is that we attracted and I think we’ve given numbers a few quarters ago that directly or indirectly we saw probably 10% of our quarterly loan committee volume energy related, but when I say energy related it’s more indirect, it’s a building for an oil company, it’s the wastewater haulers, it’s not the drilling. It’s a lumber company that -- or a steel fabricating company that’s a part of 75 or 80 contractors that are on the drill site in the 15 months before it gets into production. It’s that type of activity, which is really a nice rise in tide and I think you have to be careful with contractors, to a fairly cyclical industry, but a lot of the good folks that we do business with really have a nice bed rock of business and this is incremental to them. And they’ve been around for a quarter of a century here or so. So that’s, I hope that’s helpful in terms of the feel of it.

Matthew Breese

Analyst

Yes, it’s very much so. Last question, just related to modeling. What would be a good tax rate to use going forward?

Bob Rout

Analyst

I think ours was 26%, I think for this quarter.

Operator

Operator

Next we have Bob Ramsey, FBR.

Bob Ramsey

Analyst

I just wanted to -- a point of clarification, I know you all said that the intent is to finish the $50 million of share repurchases. Is the intent to finish that by year end or it was the intent just to finish it and you could end up renewing that to take care of that next year, I mean if volume works the way you’d like?

Michael T. Price

Analyst

Really the latter, I mean really just with a nice rhythm we're where the appropriate smaller portion of the daily trading volume and if it leaks in the next year, that’s fine.

Bob Ramsey

Analyst

Okay. And then I was wondering too if you guys could just touch on sort of the margin outlook. I mean, I know you guys were pretty open in the comments about it's obviously a tough rate environment for all banks, but is the pace of compression this quarter sort of a good way to think about what we look like in the fourth quarter give or take a little bit.

Michael T. Price

Analyst

I think so, I think if you look at the pace in the fourth quarter that’s been the pace for the last year.

Bob Ramsey

Analyst

Yes. And is that the things get sort of closer to the end as we work through 2013 and slow little bit or as long as the curve looks like it does, we’ve got more and more quantitative easing, I mean do you continue to sort of stay at his pace?

Michael T. Price

Analyst

We obviously have a forecast for next year. We have more of a community bank that looks more like a larger bank in terms of the portion of our loans that are C&I and consequently those loans are more variable rate pricing and there has been more downward pressure on that as opposed to maybe a more of a garden variety community bank would have a bigger residential real estate with more a fixed rate pricing. So maybe we take a lump or 2 earlier, but I think as rates churn we probably adjust and we’re really poised for as interest rates bottom and then they start to head up just kind of our gut, but probably any guidance more than that, you'd probably be holding my feet to the fire at a quarter. And, but that I don’t know Bob, Bob, you’re a pretty smart guy, if you will think it has many more counsel or guidance, I’ll look to my colleagues on the right here.

Bob Rout

Analyst

No, I think you framed it pretty perfectly, Mike.

Operator

Operator

And next we have John Moran, Macquarie Capital.

John Moran

Analyst

Hey, sorry to jump back in. I just had a quick follow-up, on the syndication book it looks like it’s up like almost $100 million year-to-date. And I know that most of what you guys are doing is in state and kind of household name, but may be you can just remind us what that book looks like, what kind of stuff you’re putting on.

Michael T. Price

Analyst

It’s really some backyard -- when we read about 70 names in that portfolio as most of those were really names that you would recognize in Western PA. And when we get out of state, they’re really in markets that generally we are familiar with, places like Cleveland and Columbus, and places like that. I’m looking at the list right now. And obviously larger companies, probably 2 or 3 agents that we like to work with. We have some real experienced folks, probably 3 or 4 mostly from Mellon that have had their hands on the reigns of this business for the better part of 30-plus years. We have a Chief Credit Officer to my right, Bob Emmerich, who when I was doing credit sheets for him 30 years ago, we were doing some of this type of paper and so we’re very comfortable with it. And but we also understand that we’re not that stuffy really at the end of the deal, we are over the wall, the first 3 or 4 banks. And so, we’re underwriting it fairly thoughtfully and we say no. And we kind of pick and choose and an important part of the credits that we bank is, what is the opportunity to be the #2 or #3 bank. Unusually, we have unlike a New York bank coming into Pittsburgh, because we have branches here -- it’s pretty easy for us to be the #2 bank and really get some nice cross-selling, and really know the management team, and have a really strong relationship. And they are typically in industries that we follow and we like, they might be related to energy, shallow or deep gas drilling here obviously and we’ve been doing that for 50 years. It might -- I mean, hitting on things that are important to you.

John Moran

Analyst

Yes, I think that’s helpful. One of the things I think that you touched on here that would actually be an interesting sort of thing if you can share on a go forward basis would be, of the syndicated portfolio how many of those folks do you have kind of multiple touch points with? In other words, how many is it just kind of we participated in the paper here versus how many are real kind of core relationship multiple product users?

Michael T. Price

Analyst

Yes, I think the number from my gut, and we can follow up with that is probably at least half.

John Moran

Analyst

Terrific. That’s helpful.

Michael T. Price

Analyst

Yes. And I would add in the last deposit portfolio, this group is probably over $100 million.

Operator

Operator

Mr. Stimel, gentlemen it appears that we have no further questions at this time.

Rich Stimel

Analyst

Okay, thank you, everybody. I appreciate your interest and your good questions and I would just remind the group that we are focused on being an authentic community bank, really winning on the business side with business customers, their owners and their employees. And then also, really a third pillar is efficiency and we’re excited about the future of the company and look forward to being with a number of you over the course of the next quarter or so. Have a great day.

Operator

Operator

And we thank you, sir and the rest of the management for your time. The conference is now concluded. We thank you all for attending today’s presentation. At this time, you may disconnect your lines. Thank you and have a good day.