WesBanco, Inc. (WSBC) Q3 2017 Earnings Report, Transcript and Summary

Good morning and welcome to the WesBanco Third Quarter 2017 Earnings Conference Call. All participants will be in listen only mode. [Operator Instructions] After today's presentation there'll be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. At this time, I would like to turn the conference over to John Iannone, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Denise. Good morning and welcome to WesBanco Inc.’s third quarter 2017 earnings conference call. Our third quarter 2017 earnings release, which contains consolidated financial highlights and reconciliations of non-GAAP financial measures was issued yesterday afternoon and is available on our website, www.wesbanco.com. Leading the call today are Todd Clossin, President and Chief Executive Officer and Bob Young, Executive Vice President and Chief Financial Officer. Following opening remarks, we will begin a question-and-answer session. An archive of this call will be available on our website for one year. Forward-looking statements in this report relating to WesBanco’s plans, strategies, objectives, expectations, intentions and adequacy of resources are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The information contained in this report should be read in conjunction with WesBanco’s Form 10-K for the year ended December 31, 2016 and Form 10-Q for the quarters ended March 31st and June 30, 2017, as well as documents subsequently filed by WesBanco with the Securities and Exchange Commission, which are available on the WesBanco and SEC websites. Investors are cautioned that forward-looking statements, which are not historical fact involve risks and uncertainties, including those detailed in WesBanco’s most recent annual report on Form 10-K filed with the SEC under Risk Factors in Part 1, Item 1A. Such statements are subject to important factors that could cause actual results to differ materially from those contemplated by such statements. WesBanco does not assume any duty to update forward-looking statements. Todd?

Thank you, John. Good morning, everyone. On today’s call, we will be reviewing our results for the third quarter of 2017. Key takeaways from the quarter are, we continue to make strong progress on our long term operational and growth strategies, loan growth over the past 12 months was driven by our strategic focus categories, we've demonstrated continued strength and credit quality, profitability measures and expense management and we're well positioned for success in any type of operating environment. For the three months ended September 30th we earned fully diluted earnings per share of $0.60 on net income of $26 million, for the nine-month period we earned fully diluted earnings per share of $1.79 on net income of $79 million. We continue to generate solid returns as demonstrated by returns on average assets and average tangible equity of 1.06% and 13.31% respectively. In addition, our consolidated and bank level regulatory capital ratios are well above the applicable well capitalized standards promulgated by bank regulators and the Basel III capital standards. Our long-term growth is focused on five key strategies, growing our loan portfolio with an emphasis on commercial and industrial lending while maintaining our high credit standards, increasing fee income as a percentage of net revenues over time, deriving high quality retail banking services, generating positive operating leverage and expanding our franchise. Total loan growth for the third quarter was 2.2% year-over-year reflecting the impact of our stated strategies related to our residential mortgage and consumer loan portfolios as well as higher payoffs compared to the second quarter as we continue to see developers going to the secondary market sooner to take advantage of the aggressive refinancing options being offered. Overall loan growth was driven by our strategic focus categories as we realized mid-single-digit growth and total commercial loans of 5.5% and home equity loans up 4.3%. Recent national trends and anecdotal evidence from others in the industry as well as customer comments have shown that companies are being cautious, not pessimistic which is a key distinction, and waiting to make desired capital investments until there is more certainty in the business environment in particular with regards to tax and healthcare reform. While we have not seeing any credit deterioration in any of our markets we've seen a similar slowdown in our recent loan growth compared to national trends. That said we remain optimistic on the opportunities in our markets as we continue to diversify and strengthen the quality of our overall loan portfolio. Our C&I and home equity lending focus continues to gain traction and provide diversification. We continue to reduce the overall risk through appropriate management of our consumer portfolio. As I mentioned last quarter we continue to manage the risk and return of our loan portfolio by allocating capital to our highest opportunity product areas. An example of this is our focus upon the utilization of our existing financial set of network to support our home equity lending product. We've expanded the team in our Kentucky and Southern Indiana markets during the first half of the year and are excited about their prospects as they've already begun to show nice traction in building their book of business. Furthermore, we have continued to reduce the risk profile of our loan portfolio through targeted reductions in the consumer portfolio which has declined 15% year-over-year to now represent approximately 5% of our total loans. We continue to maintain our past discipline of prudently managing loan growth and we will intentionally give up a few percentage points of loan growth by not chasing the relaxed credit standards we're seeing within our markets. This discipline is reflected in the overall strength of our credit quality measures, in addition we continue to have no concentration issues or concerns across our portfolios, as our energy related, hotel and retail exposures remain minimal. As we invest to become a larger organization we remain focused on expenses and maintaining the strong efficiency ratio which we believe is the best long-term measure of demonstrating balanced revenue growth and disciplined expense management. While our efficiency ratio might fluctuate from one quarter to the next we've maintained it in the mid 50% range for the last couple of years. We're working to control discretionary expenses as we make revenue producing hires in our new markets and complete preparations for crossing the $10 billion asset threshold of which we're about two thirds through the associated cost. Regarding preparations for the $10 billion asset threshold there're no changes to our previously communicated plans. We continue to methodically make the necessary investments and feel that we're prepared from a staffing, infrastructure development and CRA perspective. While we're ready to cross the threshold tomorrow we expect that to occur sometime over the next one to two years without having to constrain loan growth. Our preference remains to cross via a franchise enhancing acquisition within a five to six-hour drive time of our WHEELING headquarters, it is through a combination of several small to midsized deals or larger several billion-dollar asset transaction. Finally, WesBanco remains well positioned for success in any type of operating environment. We've the right teams and products across our geographies for growth during an economic expansion. Our legacy of strong credit quality and risk management will help insulate us in a downturn, we're positioned to benefit from rising interest rates through our asset sensitive balance sheet, however if the yield curve continues to remain flat we've demonstrated our ability to manage discretionary expenses. We firmly believe that our disciplined approach to credit quality, products and services we offer, expense management and our core deposit funding advantage are key long-term differentiators for WesBanco. I would now like to turn the call over to Bob Young, our Chief Financial Officer for an update on our third quarter's financial results. Bob?

Thanks Todd and good morning. We generated strong loan growth in our strategic focus categories this quarter and managed discretionary costs to generate positive operating leverage as we continued our planned investments in becoming a larger company. For the nine months ended September 30th we reported net income of 78.6 million and earnings per diluted share of $1.78 net of merger related expenses. Excluding these expenses from both periods net income would have increased 13.9% to 78.9 million from 69.3 million with earnings per diluted share of $1.79 for both periods. Year-to-date the return on average assets was 1.07% while return on average tangible equity was 13.69%. For the three months ended September 30, 2017 we reported net income of 26.4 million and earnings per diluted share of $0.60 as compared to 17.4 million and $0.44 respectively in the prior year. When excluding merger related expenses in the prior year period net income would have increased 10.5% and earnings per diluted share were the same. For the third quarter return on average assets and return on average tangible equity were 1.06% and 13.31% respectively. Unless otherwise stated my remaining earnings, related comments will focus on the third quarter's results and exclude the impact of restructuring and merger-related expenses in the prior year period. And also as a reminder financial results for Your Community Bancshares have been included in WesBanco's financial results since September 9, 2016, the date of the consummation of merger. Turning to the balance sheet total assets increased year-over-year to 9.9 billion as of September 30, 2017, the total portfolio loans increasing 2.2% to 6.4 billion. Year-over-year total loan growth was driven by our strategic focus categories as total commercial loans grew 5.5%, and home equity loans grew 4.3%. This mid-single-digit loan growth more than offset its targeted reductions in the consumer portfolio as we reduce its risk profile as well as increase secondary market loan sales in the residential real estate portfolio. Regarding residential real estate, year-to-date mortgage originations have increased in the mid-single-digits year-over-year and we have continued our approach to selling a higher percentage of these originations in the secondary market which has the benefit of producing increased gain on sale income and it was up 35.5% year-over-year. Our year-over-year loan growth demonstrates our commitment to the long-term success of our company as we prudently manage our loan portfolios to encourage growth in our focus categories without sacrificing credit standards. Lastly the current size of the securities portfolio at 23.6% of total assets as compared to 24% last year continues to provide us the near-term flexibility to continue to manage the size of our balance sheet, provide liquidity as well as supporting loan growth. Total deposits were 7.1 billion at September 30th as growth in both interest bearing and non-interest-bearing demand deposits offset the continued targeted reductions in [indiscernible] deposit. When excluding CDs total deposits increased 3.7% as total demand deposits now represent 49.5% of total deposits supported by 9.1% year-over-year growth in non-interest-bearing deposits. I'll turn now to net interest income and the margin, net interest income for the third quarter increased 19.7% year-over-year to 74.3 million due to a 13.3% increase in average earning assets and a 16 basis points increase in net interest margin. The growth in earning assets was due to a full quarter average from YCB acquired loans and loan growth. The net interest margin increased both year-over-year and sequentially reflecting the benefit from the increases in the Fed's targeted federal funds rate over the past year and the higher yield on YCB's acquired net assets. Yields on earning assets increased 26 basis points year-over-year more than offsetting 14 basis points increase on interest bearing liabilities which was primarily from higher rates on interest bearing demand deposits and that category includes public funds for borrowings and for our trust deferred securities. We believe that our core deposit funding advantage combined with a continued increase in non-interest-bearing deposits to 26% of total deposits is helping to contain our overall interest-bearing deposit funding costs which were up only eight and five basis points year-over-year respectively for the three and nine months periods. During the third quarter we realized 12 basis points accretion from prior acquisitions as compared to six basis points in the prior year and eight basis points during the second quarter of this year. The 12 basis points included an approximate $1.1 million benefit from the payoff of an acquired YCB loan with a specific loan mark assigned. We currently anticipate acquisition related accretion to return to a level more consistent with prior quarter's performance. For the quarter ended September 30, 2017 non-interest income decreased slightly from the prior year to 20.9 million. The primary drivers of the decrease were a decline in other income due to the prior year's quarter including higher commercial customer loan swap related income, minimal net securities gains this year and a net loss of 0.3 million on other real estate owned from the liquidation of certain real estate owned and other bank owned property. Excluding the impact of net securities gains and net gain or loss on other assets in both periods non-interest income for the third quarter of 2017 would have increased 1 million or 4.7% year-over-year. As I mentioned our strategy to sell a higher percentage of residential mortgage originations in the secondary market resulted in a 35.5% increase to $1.1 million in net gains on sales of mortgage loans. In addition, the higher electronic banking and deposit service fees year-over-year reflect a larger average customer base from the addition of our new Indiana and Kentucky markets. I'll turn to operating expenses, as we made the appropriate investments for a long-term growth including preparation for the $10 billion asset threshold we remained focused on discretionary costs and maintaining a strong efficiency ratio. As of September 30, 2017, we reported three and nine-month efficiency ratios of 57.03% and 56.91% respectively. We have maintained an excellent efficiency ratio despite most individual expense line items having been impacted on a year-over-year basis due to the addition of YCB's Indiana and Kentucky markets. Salaries and wages for the third quarter due reflect the annual compensation adjustments for all of our employees. Some additional revenue producing hires in Indiana and Kentucky, related to lending and wealth management growth opportunities as well as our preparations for the $10 billion asset threshold. [indiscernible] category of note is the year-over-year decrease in FDIC expense for both the three and nine-month periods, from changes in the rates scheduled for banks under 10 billion and improved risk factors. At this point in the year most cost savings from the YCB acquisition are reflected in the current run rate of quarterly expenses. Turning now to asset quality and capital, overall our credit quality continues to be strong and is reflective of our legacy of credit and risk management. As of September 30, 2017, nonperforming assets as a percentage of total assets improved to 48 basis points and criticizing classified loans improved to 1.24% of total loans, while nonperforming loans as a percentage of total loans increased slightly year-over-year to 66 basis points. Net charge offs as a percentage of average portfolio loans were just 12 basis points in the third quarter of 2017 as compared to 20 basis points in the third quarter of last year while they were 12 basis points for the year-to-date period as compared to 14 basis points last year. The allowance for loan losses represented 71 basis points of total portfolio loans at September 30th 2017 compared to 69 basis points in the year ago period. And it total reflects the YCB and ESP acquisitions whose loans are mark-to-market at date of acquisition with no transfer of the acquisition date allowance for loan losses. The provision for credit losses increased slightly year-over-year from $2.2 million to $2.5 million due primarily to loan growth. Before opening the call for your questions, I would like to provide some thoughts on our current outlook for the last quarter of 2017. We are modeling one additional 25 basis points fed funds interest rate increase in December, however it is important to remember that the yield curve experience over the past few months has become flatter than macro-economic projections utilizing our modelling late last year. The two years to 10-year treasury spread is roughly around 80 basis points as compared to 125 basis points quarter at year end 2016. Lower spreads generally result in lower margins for the industry and despite our general asset sensitivity, we are not immune from such factors. Despite that fact, we will continue to exhibit control over our discretionary expenses and target of strong efficiency ratio as we appropriately balance the necessary investments [pertaining] to our planning and future growth. We’re now ready to take your questions. Operator would you please review the instructions.

I would be happy to sir. [Operator Instructions]. And the first question will come from Russell Gunther of D.A. Davidson. Please go ahead.

Hey good morning. Wondering if we could just dig in a little bit to the loan growth performance this quarter particularly on the C&I front, just to get a better sense of the dynamics at play, how the pipeline looks coming out of the third quarter and what your outlook would be going forward?

Yeah, I think from a pipeline perspective, we did see a low point in the mid-summer, recently rebounded a little bit since that and has been holding the last month or two. I think what we’re seeing is very similar to some of the national trends that look to some of the earnings calls before us and I think we’re seeing similar to similar trends. I feel good about the teams that we have, I think we’ve got investment in the commercial bankers, they’re also there, they’re making calls, they’re doing the things that they need to do. We’re just seeing our real general reluctance on the part of customer base to borrow money and you heard about others calls as well to. I have specifically spoken to a number of C&I customers who talked about uncertainty around taxes, healthcare and everything else that’s causing them to be a little cautious. So, I would have liked to see a little more C&I growth during the quarter but we’re falling in line with national trends. And then when I look at some of the other areas that we emphasized, some of the indirect auto, [indiscernible] auto, just didn’t feel like that’s right to be doubling down with that kind of bucket at this point in time. That’s impacted us by I think we grew, shrunk the portfolio by around 15% over the last year which is about 1% of our total loans. So, if you look at our 2.2% year-over-year loan growth, that’s with the 1% reduction on basically indirect to some of the consumer side. If we have grown that it would had been up over four, and if we had not scaled back on multi-family we'd up over five, so I think that's a good reason to be where we're at, is this to be growing faster in multi-family and faster in indirect auto right now, just not sure the risk return is there, but getting back to initial question about C&I, we're still in the mid-single-digit range year-over-year on that, feel good about the teams that we've, think we'll be able to capitalize on whatever the market gives us, just don't know what the market is going to give us from quarter-to-quarter based upon a lot of uncertainty that’s out there.

And then just my second question would be, you touched on M&A and what your guidepost are and where you're interested, just curious maybe more anecdotally about the pace of conversations and whether you're seeing those pickup at all or is similar uncertainty that's impacting organic loan growth, weighing on those M&A discussions as well?

No I think it's actually since we had some conversations with some bankers over the last couple of weeks on that topic and the pace of conversations is strong and the thought is that pace of conversations might even increase as the uncertainty just continues, people aren't sure what's going to happen with the yield curve and not sure what's going to happen with taxation, not sure what's going to happen with healthcare, so I think there's a lot of smaller community banks that are out there wondering what the next couple of years are going to look like and if they've been contemplating doing the transaction at all in the last couple of years with where their currency is probably now versus where it was a few years ago and some of the uncertainty in the future, I think the level of calls have increased, I know the level of context that have been made to me from potential opportunities that we might be looking at has increased, that's been pretty robust in terms of the number of calls I'm getting from smaller community banks.

And the next question will come from Steve Moss of FBR. Please go ahead.

Good morning guys, it's actually [Kyle Peterson] on for Steve today. Just wonder if we could start with fee income, some of that looked a little lighter than what we are looking for, certainly kind of on the trust area, wondering if you guys could talk a little bit about the outlook on that and when we can expect some of these new hires in the new markets to kind of start being kind of added up to the trust revenues?

Maybe I'll talk about the new markets and let Bob talk about the trust fee trends.

On the trust fee trends, I would note that as you take a look at their accrued trust fee at the end of the quarter we did have an adjustment there, and that adjustment was just slightly above $2,000, so if you would normalize for that then you'd have about the same amount as you would've had in the second quarter, the second quarter was about 5.6 million and 5.4 million this quarter. I would also note that we had a higher amount of the state fees in the second quarter as compared to the third quarter. Those would be your two factors that at the edge would impact the growth rate as it was running closer to 8% year-over-year after six months and over 5% now but primarily due to those two factors.

We've continued to make investments particularly we call it the KSI market Kentucky, Southern Indiana, the former Your Community Bank franchise and the [indiscernible] area as well as in the Lexington area and we’ve added several private bankers, six license securities reps that are going through the process of licensing right now. I think two of them are licensed, the other four will be licensed here soon. We’ve hired a trust portfolio manager that actually is in market there and also a trust new business development person in market there, they both come on board within the last 90 to 120 days and we’re working on several different security reps or brokers to have in the markets as well. So, we’re in various stages of staffing up on that, pretty well complete actually in staffing up on that but it’s all been in the last 90 to 120 days. So, we should see the benefit of that roll through in future quarters.

Okay, cool that’s helpful. I guess a little bit kind of on the margin, I know there is some moving pieces and make shift and accretion and stuff. Just wanted to see what you guys are seeing in kind of core strip down, loan yields and pricing trends, kind of where those trends are going without any rate hikes?

In terms of net interest margin, first we announced the 12 basis points related to accretion versus eight last quarter. So, the trend in the first two quarters was to be up two to three basis points. We attribute that to repricing in the various portfolios related to the additional 25 basis point rate increases first in December and then they were two in March and June. So, if you look at that on a quarter basis, third quarter to second and you normalize the day count, you’re about flat some people have called it one or two basis points. The trend going forward would be back to between the six and the eight basis points in terms of accretion. In terms of our outlook, we still see with additional federal funds rate increases we’re expecting one here in December and probably one or two next year, we have two in our model currently that that will continue to produce a kind of increase in quarterly margin that we had talked about earlier this year. Yes, you are right, we didn’t see that this quarter, a little bit higher deposit data, couple of basis points there and that seemed to make that difference. So, we’ll see where that lands here in the fourth quarter, but that kind of a contour. You’re not going to see a significant increase in the net interest margin going forward. So, the contour that I just discussed.

So, I guess are we looking more like closer to low end of the two or three bps without some further kind of yield curve steepening with future hikes? Was that way to look at it?

Yeah, I think whether its two or three we shall see but more or one to two but yeah.

I’ll just add to that real quickly too, one of the things I talked about in the last couple of years we'll get a chance to see how that plays out here and now that rates are starting to go up is that we have a core funding advantage because of the Marcellus Urica shale that’s rolling in eight figure deposits on a monthly basis, it's pretty low cost or no cost deposits coming into the organization and as rates start to rise my hypothesis has been that we ought to be able to lag that a little bit and take advantage of that. I think we’re starting to see that, start to materialize and some of the quarterly numbers and I hope that trend continues going forward. But it's nice to be in a franchise where we got that type of liquidity and deposit base on a regular basis and these are checks from homeowners that are getting checks from the gas companies coming into our bank and these have 20, 30, 40-year lifespan still and should be a core funding advantage for quite a while, and we're 90% loan to deposit so we are not in a challenge loan to deposit ratio but it's nice to have these kinds of deposits coming in as well.

[Operator Instructions]. The next question will come from Austin Nicholas of Stephens Inc. Please go ahead.

Maybe just on expenses I know we touched on about two thirds of the $10 billion expenses are kind of in the run rate, as I look at that line how should we think about it over the next couple of quarters given the eight hires in your new markets and then also some of the volatility around the marketing expense?

On the people side of it, we're pretty well there with regard to the staffing we need to have in place to cross 10 billion. Maybe one or two people but it’s a pretty low number, we've been investing in that for the last couple of years. I did go back and revalidate with our project management team, we're two thirds roughly along in the process, and what's remaining is just the software expenditures and somethings like that that we got to finalize but we're two thirds of the way through on that piece, but the people part of it is for the most part done. On the marketing side we had a big delta shift between the first and the second quarters, you might remember, we came to the midpoint of the year about where we expected but we had much lower marketing expenses in the first quarter than we thought and much higher in the second quarter, and that was all due to timing, but to the first six months we ended up about where we wanted to be but we're taking a pretty stringent look at marketing as you saw in the third quarter I think that will continue to roll forward and looking at the return we're getting for the historic spend that we've had on the marketing side, so we're going to continue to be pretty disciplined on the marketing expense going forward.

So, would it fair to say that marketing maybe on a full year basis potentially slightly lower in '18?

As far as the increased size of the franchise, right, so we have YCB, would be onboard for a full year in '17, so I would see an '18 run rate on expenses probably similar to '17, similar to down a little bit, I wouldn't see a dramatic expansion at all on the marketing.

And then on the deposit side you mentioned the shale inflows and it looks like you saw some nice non-interest-bearing deposits were up close to call it 11% annualized on quarterly basis, I guess what drove that, was that still the shale deposits kind of helping that number?

Yes, the numbers have moved around a little bit, it kind of follows the price of natural gas a little bit, at its low point and kind of the low seven figure range, six, seven months ago and hopped back up to summer back to the eight-figure range, it was in the eight figures range a year ago, so, it tends to move around a little bit but it has been nicely into the eight figures the last couple of months and we hope that trend continues but that is driving a good portion of it.

Some of that is seasonality as well on public funds, although public funds for the most part are in the interest-bearing demand deposit category but as Todd said we’ve had nice growth in both consumer as well as the public funds categories in the first nine months.

And some of the marketing spend was around campaigns to drive deposits as well to sell that’s on trying to attract check-in accounts across the entire franchise, not just that part of the franchise that’s in shale related areas.

Understood. And then just briefly on the deposit beta, I know you briefly touched on or mentioned it but maybe just more specifically what kind of deposit betas have you seen maybe across your different products this quarter.

Well the bulk of the increases in the interest-bearing demand deposit category and that is for the most part public funds related. That’s a category as you can see on the income statement that would be up and most year-over-year. There is also a little bit in the money market category but you know whether its two or three or four basis points per quarter it's still as compared to a 25-basis point rate increase as I’ve looked as Todd has in some other releases today, that’s on the low end 10 to 15% and I think what we’ve said in the past is as you stack more rate increases on top of one another, you are likely to see iteratively a higher percentage increase. But for us, we’re offsetting that with growth on the non-interest-bearing side. We’re seeing you know well controlled CD costs and some run-off there that’s strategic in nature. Little bit, that you would expect as fed funds go off on the interest-bearing side, interest bearing demand and then the borrowings cost as those maturities roll through you see a little bit of increase there as well. So, I’m not sure if that helps you or not?

That’s helpful. And then maybe just finally real quick on loan growth if we back-out some of noise this quarter in terms of run-off and some strategic I guess that’s emphasizing. You know as I think about the next quarter, should we expect period end growth from here, just given the results and decline in balances in the third quarter and maybe just any sense on kind of range that you would expect based upon what we’ve seen so far.

On previous quarters I’ve mentioned that it's really hard to look at quarter-to-quarter because it bounces around because of the secondary market taking some of the commercial real estate loans that have stabilized and come to maturity and that was a hefty number in the third quarter particularly towards the end of the third quarter we saw a number of large refinancings come in into the secondary markets. So, we have a projected pay-off scheduled that goes out but that moves around a lot based upon market dynamics and stabilization rates for customers and how aggressive the secondary market is. So those things can move by three or four months at a time, some accelerate and some get delayed and with the $6 billion portfolio, 50 to $60 million in two or three loans can have a big impact from quarter-to-quarter. So, it's just hard to anticipate and be able to look at that, that’s why I tend to like to look at the year-over-year trends and because that gives me a better feel for really what’s going on with those markets and breaking it down into the areas under focus like C&I and then commercial real estate. You know we saw three or four years ago, at some point the real estate market would start to slow down, rates would go up, product concentrations like multi-family would happen and that’s why we put the effort and energy into building the C&I portfolio and the C&I lending team and putting the investments there, so really try to focus on -- but that is -- the C&I is probably a better -- little better quarter-to-quarter kind of look at those type of things versus the real estate which is going to move around dramatically and real estate is a big enough part of our balance sheet, that it does drive the whole loan growth when you take a quarter and you try to analyze it, some quarters it looks significantly greater, the quarters it doesn't look but on an average basis year-over-year that's kind of the way we look at it, so, I'm not giving any answer, I know for the fourth quarter or beyond that, because I don't really know the timing. I know what's going to go to the secondary market but I don't know the timing of when that's going to go to the secondary market, a lot of it has to do with what happens with the rates over the next couple of quarters in the secondary market and what our customers choose to do with them when they pull the trigger.

[Operator Instructions] Your next question will come from Daniel Cardenas of Raymond James. Please go ahead.

Most of my questions have been asked and answered but just maybe in terms of loan growth and maybe deposit competition geographically, I mean are there any areas that you're seeing better loan growth than others and then perhaps on the deposit pricing side are there any areas of your footprint that are perhaps showing greater pricing pressure than others?

I think on the loan growth side I can't point to any market that is operating a lot differently. I think a lot of our commercial real estate growth had come from some of the more urban markets because that's where some of the multi-family activity was happening and that's definitely slowed, we're not emphasizing that as much as an organization, but we're seeing some office, we're seeing some other all single tenant type of projects being done that we're financing, so, we're still seeing some decent real estate activity in some of the markets. But from a C&I perspective I can't point anyone particular market, [I saw] the customers that I've come across in a variety of different markets, all kind of have the same view about being a little conservative about where they go from here. On the deposit side, I mentioned the Marcellus and Utica shale which from a market share perspective in terms of branch market share, deposit market share, we've got our big branches in the right place, because that's where we're capitalizing on that, if you look at some of our markets that are newer to us that we've been in maybe for the last 10-15 years that don't have as big deposit balances, those tend to be some of the bigger urban markets, and fortunately we're in a position where we don't need to go out and price up CDs and things like that to get deposit growth out of those markets, the way it's kind of working is we get the benefit of some pretty nice deposit flows in our core legacy markets at some pretty lower rates but yet we got the top 10, top 15 market share in some of the bigger metro urban areas within a couple of hour drive of us with good lending teams in place. So, really the plan -- continued plan is to generate the deposits in the legacy markets and have higher loan growth in some of the more urban markets. Now we do get deposit growth in the new urban markets and we do get loan growth in the legacy markets but on an overall basis we're able to capitalize on the lower deposit cost in the market where I'm sitting now like WHEELING, and lend that back out in Columbus or a little in Lexington without having to necessarily pay up on CD rates or money market rates or something like that in those markets which I think some of the other banks that are -- that we would have to face if we were just in some of those bigger growth markets.

[Operator Instructions]. And I’m showing no additional questions in the queue. We will conclude the question-and-answer session. I would like to hand the conference back over to Todd Clossin for any closing comments.

Great, thank you. And thank you for all of your time this morning. We’re going to continue to make strong progress on the operational and gross strategies that we continue to focus on and make sure that we maintain a strong financial institution. We’re looking for good long-term growth prospects for our shareholders and again I want to thank you for being with us today and hopefully we’ll get a chance to see you at an upcoming shareholder event. Thank you.

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