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First Commonwealth Financial Corp (PA)  (NYSE:FCF)
Q1 2019 Earnings Call
April 24, 2019, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the First Commonwealth Financial Corporation First Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Ryan Thomas, Vice President of Finance and Investor Relations. Please go ahead.

Ryan M. Thomas -- Vice President, Finance and Investor Relations

Thank you, Gary. 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. We've also included a slide presentation on our Investor Relations page with supplemental financial information that may be referenced throughout today's call.

With me in the room today are Mike Price, President and CEO of First Commonwealth Financial Corporation; and Jim Reske, Executive Vice President and Chief Financial Officer. After brief comments from management, we will open the phone call for your questions. For that portion of the call, we will be joined by Jane Grebenc, Chief Revenue Officer and President of First Commonwealth Bank; Brian Karrip, our Chief Credit Officer; and Mark Lopushansky, Chief Treasury Officer.

Before we begin, I would like to caution listeners that this conference call will contain forward-looking statements. 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.

Today's call will also include non-GAAP financial measures. Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported results prepared in accordance with generally accepted accounting principles. A reconciliation of GAAP to non-GAAP operating measures can be found on page 13 of today's slide presentation.

And now, I would like to turn the call over to Mike Price.

Thomas Michael Price -- President and Chief Executive Officer

Hey, thanks, Ryan. And before I turn to first quarter results, let me say a word or two about our recently announced transaction.

On Monday, we announced the acquisition of 14 branches from Santander Bank, along with $525 million in deposits and $120 million in loans. This strategic opportunity -- excuse me, will extend our footprint into contiguous markets in Central Pennsylvania, markets we know quite well and with similar demographics to our existing Western Pennsylvania footprint.

These branches also come with strong local leadership that will help us hit the ground running. Through this acquisition, we're acquiring approximately 22,000 new retail and small business households, representing an expansion of our customer base by approximately 10%. We believe that these customers will embrace being part of the local Pennsylvania bank.

This opportunity comes on the heels of four successfully executed acquisitions in as many years for our bank. Looking back at these opportunities taken as a whole, we've grown deposits post acquisition. We acquired a total of $1.3 billion in deposits in those acquisitions, and deposits in those regions now total $1.5 billion. In each of those transactions when we've been able to quickly layer on a commercial chassis to the acquired retail franchise, which has been a recipe for success for us. We expect to do the same thing in these markets.

From an execution standpoint, this acquisition is very similar to the branch acquisition we successfully completed in 2016 in Northern Ohio. In fact, it's smaller and less complicated, in part because the seller will not be actively competing with us in the market. In a broader sense, this transaction is consistent with our previously articulated acquisition strategy for some time now we've publicly expressed an interest in acquiring institutions with low loan-to-deposit ratios in overlapping or contiguous markets.

This is essentially a cash acquisition of a local $0.5 billion bank with a 20 % loan-to-deposit ratio and no social issues at a purchase premium that is less than what we would have had to pay for any whole bank to meet our criteria. From a financial point-of-view, the acquired deposits provide low cost stable funding that will immediately improve our profitability and allow us to continue the steady pace of our loan growth.

We're seeing continued strong lending opportunities in both our Pennsylvania and Ohio markets, which of course presents the challenge of funding our loan growth with a similar amount of deposit growth to keep our loan-to-deposit ratio at or below 100%. This acquisition provides considerable breathing room by bringing our loan-to-deposit ratio down to 90%.

Now, let me say a word or two about our quarterly results before I turn it over to Jim. First, this is the best start to a year that we've seen in a long time. Strong loan growth of $94.7 million or 6.5% annualized, and even stronger average deposit growth of $107.6 million or 7.3% annualized growth should set us up well for the rest of the year. Our loan growth was distributed across the board with direct C&I lending leading the way. Over two-thirds of our loan growth and a large portion of our deposit growth came from our newer markets in Ohio.

Also encouraging, our net interest margin expanded 5 basis points from last quarter to 3.75%, and our underlying fee income trends are promising. Fee income was down from last quarter, but I would caution against reading too much into the quarter-over-quarter change as a large part of that was because of last quarter had a benefit of approximately $1 million in one-time items including an insurance recovery. Along those lines, a lot of our fee income comes from deposit service charges and debit card interchange income, which is directly correlated with the number of processing days there are in any given quarter. And in the first quarter, we had six fewer processing days than last quarter. But our dedicated fee businesses of insurance and wealth management are off to a strong start this year, and the contribution that our SBA and mortgage businesses are making to fee income continue to build momentum, so we continue to believe that fee income will make a steady -- a steadily growing contribution to earnings in 2019.

We've had a very intense focus on small business recently and particularly deposit gathering, so I'd like to end by highlighting some of the progress on that front, focusing a little bit on the lending side. First, the first quarter of 2019 saw a 36% increase year-over-year in book small business loans, improved talent in the branch manager ranks and better training coaching, and coaching coupled with better calling discipline are the primary enablers. Second, we continue to streamline both our product and credit approval process for lines of credit, term loans and credit cards. We're excited about all of these improvements because they will help us better serve our small business customers, both in our home markets in Western PA and Ohio, and in our new Central PA markets.

And with that, I'll turn it over to Jim.

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, Mike. Earnings per share of $0.25 in the first quarter resulted in core ROA and core return on tangible common equity figures of 1.27% and 14.59%, respectively. Our efficiency ratio improved ever so slightly to 58.18% as non-interest expense was essentially flat from last quarter. The trend in asset quality ratios remains positive. For example, at the end of the first quarter, non-performing loans totaled $31.3 million, a decrease of $26 million from a year ago, and the lowest level in over a decade. Non-performing loans as a percentage of total loans were 0.53% at March 31st, exactly half of the 1.06% level of a year ago. And reserve coverage of non-performing loans improved to 159% compared with 94% a year ago.

The 5 basis point expansion of the margins was at the high end of our expected range, reflecting the benefits of December's rate hike on earning assets even while deposit costs remained under control. Part of the margin expansion was continuing positive replacement yields, reflecting the lingering effect of last year's rate hikes. Deposit growth is strong even while deposit costs remained in check as growth was centered on transaction accounts.

Looking forward, we are extremely pleased to have announced on Monday the acquisition of over $0.5 billion in deposits and $120 million in consumer and small business loans. These new deposits and loans will result in an immediate pickup of 5 basis points to 10 basis points in our margin in the first full quarter after close. This is our fifth acquisition in the last four years and our second branch acquisition in the last three years. And our experience has taught us that these branch acquisitions have low execution risk, since the majority of the revenue stream comes from the ability to pay down more expensive borrowings with complete certainty on day one.

The fact that debit card interchange income is more valuable in our hands versus the seller because we are under $10 billion in total assets helped as well. In fact, it is the low risk nature of this acquisition and the certainty of the earnings accretion that leaves us comfortable with the earn back period implied in the transaction. And while we don't see any evidence of an economic downturn in our local markets, the transaction leaves us with an even stronger balance sheet that is better prepared for any eventual downturn, since the deal presents a very little capital pressure, no funding contingencies and improves our liquidity position.

Finally, to-date, we have purchased 176,000 shares under our share buyback program or about $2.3 million of the current $25 million authorization. In view of the superior use of capital represented by this transaction, we expect that we will soon be suspending buybacks for the time being.

And with that, we'll take any questions you may have.

Operator

We will now begin...

Ryan M. Thomas -- Vice President, Finance and Investor Relations

Operator, questions?

Operator

Pardon me, I must be getting confused. Did you want to start the Q&A session?

Ryan M. Thomas -- Vice President, Finance and Investor Relations

Yes.

Questions and Answers:

Operator

I'm sorry. I didn't hear my voice. I'm going back at it again. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Frank Schiraldi with Sandler O'Neill. Please go ahead.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Good afternoon. Just a couple of questions, first on the efficiency ratio. I think, you guys have talked about a target of 55% by a year-end, just wondering your updated thoughts on that front.

Thomas Michael Price -- President and Chief Executive Officer

Yes. We were -- we'd like to get to a 55% efficiency ratio for a quarter by year-end. We've been good at having good operating leverage over the years and keeping our costs flat. We feel like we have a good momentum in our lines of business, particularly with some of the newer lines, mortgage and SBA, and our regional banking model, the deep pipelines on the commercial side in Northern Ohio, Columbus, Cincinnati and Western PA, so that's the goal. Jim, anything you want to add?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

No. I would say that still is the goal and we still think we're on track for that. And the fact that this acquisition should close before that, so we should have the full operating results in -- reflected in the fourth quarter. On an operating basis, we should still be able to hit that goal of getting to a 55% efficiency ratio.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Okay, great. And then, Jim, you mentioned on the NIM, obviously you got a benefit from the deal, but if we just were to think about the NIM excluding that, just the core NIM here, what are your thoughts on given your -- the neutral nature of the balance sheet at this point, your thoughts on holding the NIM at these levels?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. Thanks, Frank. And I'm happy to address that and give you our thoughts on the NIM as best as we can see going forward. I know there's a lot of concern in the industry about NIM compression and everything we see really does not show that at this point. Our guidance consistently in recent quarters has been for slow gradual NIM compression. We are still getting the benefit of positive replacement yields on the asset side of the balance sheet and still able to hold the line on growing the cost of funding. So we think that we will still get some margin expansion from here. But within the next several quarters that will flatten out, we see generally NIM flattening, but really not seeing the NIM compression. Probably right around the time that happens, this deal will close and kick in, and that'll give us a lift to the margin.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Okay, great. And then just finally on loan growth, it's pretty healthy in the quarter, wondering if that's as you think about it versus previous periods if that's more a function of reduced paydowns or more a function of stronger origination? Thanks.

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

It's a little bit of both, but mostly stronger originations. Our pipelines in -- on the consumer side and also in the commercial side are really as deep as they've been for several years.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Okay. Thanks for all the color.

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you.

Operator

The next question comes from Steve Moss with B. Riley FBR. Please go ahead.

Steve Moss -- B. Riley FBR -- Analyst

Good afternoon, guys.

Thomas Michael Price -- President and Chief Executive Officer

Good afternoon.

Steve Moss -- B. Riley FBR -- Analyst

Just following up on the origination yields, just kind of wondering, give a number exactly kind of where they are relative to what's running off the portfolio, Jim.

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. We -- I said, the net replacement yields are still positive and I can give you just a ballpark figures for the first quarter, the new loans are coming down just here under 5%, that's in the aggregate, certain portfolios where the originations coming out over 5%, and the aggregate of the new originations coming out at 4.98%, and the runoff was 4.49%. So still healthy replacement yields. Now, without rate hikes and if that rate environment that's going to taper off eventually, but for now it's still positive.

Thomas Michael Price -- President and Chief Executive Officer

But also helps is just the mix of our loans getting decided -- they're a little bit more commercial in center where the spreads are still pretty good.

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

That's right.

Steve Moss -- B. Riley FBR -- Analyst

Right. And in terms of the -- I hear you guys in terms of the better production, what were the underlying drivers with regard to C&I and construction loan growth this quarter, any particular industries or geographies?

Thomas Michael Price -- President and Chief Executive Officer

Yes. The geography was probably -- only about two thirds of the growth occurred in Ohio on the loan side and probably a good portion about half on the deposit side. And it doesn't really -- we've moved to a regional banking model with the president in each market and really trying to coordinate things more geographically as opposed by line of business. And we just think it gives us a better ground game. Before we did the -- we extended the franchise into Ohio. It was easy to do that in your backyard of Western PA and Pittsburgh, but I think, it's really given us some nice momentum on the backs of these acquisitions in Canton-Massillon in Northern Ohio, and Cincinnati and Columbus and Delaware County there.

Steve Moss -- B. Riley FBR -- Analyst

Okay, that's helpful. And in terms of the construction loans, so those are just existing drawndown -- were just drawdowns on existing lines or is that new originations?

Thomas Michael Price -- President and Chief Executive Officer

A little bit of both. And we have a pretty good portfolio that has a natural amount of draws. And just projects, everything mixed use projects, again I think, more of the projects have been in Central Ohio than in Western PA.

Steve Moss -- B. Riley FBR -- Analyst

All right. Thank you very much.

Operator

The next question comes from Russell Gunther with D.A. Davidson. Please go ahead.

Russell Gunther -- D.A. Davidson -- Analyst

Hey, good afternoon, guys.

Thomas Michael Price -- President and Chief Executive Officer

Good afternoon.

Russell Gunther -- D.A. Davidson -- Analyst

So circling back to the long growth conversation, a really good start to the year as you said. I think, previously we've spoken about a -- kind of mid-single digit outlook. So you've given comments about the favorable pipelines, is there a shot for you guys to outperform that mid-single digits and put something up closer to the 7% annualized we saw in the start to the year?

Thomas Michael Price -- President and Chief Executive Officer

We hope so. I think, we've been pretty conservative and really thought through operating leverage in keeping our costs flat. And then really we've had double digit earnings-per-share growth for -- I think, five to six years with very modest growth, probably of about 4% all-in, notwithstanding the acquisition. But I think, that now with a more regional business model and some other business signs beginning to kick in, we had a better consumer side of the equation in this past quarter. I think, we're just hitting on a few more cylinders. And with that -- and by the way, I think, we're taking less credit risk than we did three to five years ago certainly. And so I think, we're in a good place and just we're starting to hit our stride.

Jim, anything you want to add?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. I just think it's exactly right. I like the fact that it's a fully diversified growth balancing consumer, commercial and geographic diversity as well.

Russell Gunther -- D.A. Davidson -- Analyst

It's very helpful, guys. I appreciate it. And then last question for me is on capital deployment. So I hear you (ph) about the buyback likely suspended from here, but as you integrate the branch purchase, would you consider or are you still open to whole bank deals in 2019, or is that something that you would similarly push out as you focus on this integration?

Thomas Michael Price -- President and Chief Executive Officer

This integration is very important to us. We've really focused on executing and retaining the deposits. Jane Grebenc, her presence in the room with me today, we'll be out over the course of the next few days in the market, meeting all the branch managers, meeting with employees. It's -- these are important to us. We need to retain the deposits, get a good commercial lending team on top of that and make sure they work.

That being said, we've been pretty sequential, we've done about one a year. If something else came along that was really attractive, we certainly would be interested. But we've looked at over 25 deals just to do five. So they have to work for us strategically and then also financially it's a pretty important screen as well. So yes, it's probably unlikely. I hope we have a -- with that being said, I hope we have a nice opportunity, but it has to work. And we look at a lot of things to just do a few.

Russell Gunther -- D.A. Davidson -- Analyst

Got it. All right. That's it for me. Thank you.

Thomas Michael Price -- President and Chief Executive Officer

Good bye. (ph)

Operator

(Operator Instruction) The next question comes from Collyn Gilbert with KBW. Please go ahead.

Collyn Gilbert -- KBW -- Analyst

Thanks. Good afternoon, guys. If I could just start on the branch acquisition, just a couple of questions there. So first was, what was the reasoning for why Santander was selling these branches?

Thomas Michael Price -- President and Chief Executive Officer

I think -- I'm speculating, all right, and that's -- I just think it it was a little detached from their core markets perhaps, and certainly an opportunity for us. Jim, any other color you would add?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. I mean, it's relatively immaterial transaction for Santander given the size of the banks to global bank. But if you look at the map that we published along with our earnings release, these are really kind of non-core markets for them. They're really great markets for us. They're very similar in texture to the markets we're in already, contiguous to us, so they make a lot of sense for us. But I just think looking at the map for them, really wasn't core from their perspective.

Thomas Michael Price -- President and Chief Executive Officer

Yes. And...

Collyn Gilbert -- KBW -- Analyst

Okay.

Thomas Michael Price -- President and Chief Executive Officer

...Collyn, just as an sign, and I think, I've shared this with you before, we probably have 44%, 45% of our core depository comes out of our community PA markets, which are these smaller towns and more rural areas of Pennsylvania, and this is contiguous to that. So it's just that they're very attractive to us quite frankly.

Collyn Gilbert -- KBW -- Analyst

Okay. And to your point Mike, you have said the difference here or one of the advantages here is that Santander is exiting the market, so they will not, is that correct, they're not going to be a competitor of yours?

Thomas Michael Price -- President and Chief Executive Officer

Yes.

So it sounds like new customers?

(multiple speakers)

Collyn Gilbert -- KBW -- Analyst

Still have an option, OK.

Thomas Michael Price -- President and Chief Executive Officer

Yes. That's right.

Collyn Gilbert -- KBW -- Analyst

Okay. And then just a couple more questions on the deal. So Jim, I know you had indicated NIM accretive 5 basis points to 10 basis points, and I'm sorry, did you say that was right out of the gates, right, in the first quarter?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. It should be in the first full quarter after close.

Collyn Gilbert -- KBW -- Analyst

Okay. And so then can you just again tell us what the intention -- potential use of the proceeds are because I guess, I was thinking it was going to be actually more NIM dilutive just because it was going to go into cash. So is that right out of the gates to you're going -- to you intend to use some of this to pay down borrowings and just what direct to the math on that?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

No problem at all. I'm happy to give you as many numbers as we can to make it as clear as possible. We thought we've given a lot of the figures with the transaction in terms of supplementary published. But I'm very happy to go through some of the income statement items. The total cash proceeds from the deal will be the amount of the -- the dollar amount of deposits less the premium, less the loans, less the fixed assets received. That'll be about $390 million and we'll use that cash to pay down short-term borrowings, which are relatively expensive right now, and that'll produce immediate effect -- immediate pick up in spread income. We get spread income from the loans that we're purchasing as well, and then of course we have to pay for deposits that we're picking up.

All those together, all told, we'll get resulting in an increase in spread income, pre-tax spread income of about $12.9 million in the first year. Then of course this fee income as well, so deposits have fee income, and not just regular deposit fee income, but interchange income as well. And I try to pointed that out one of the advantages here as a producer under $10 billion. The interchange income is more valuable in our hands than it is in the hands of Santander. So the total amount of fee income is about $3.8 million, and that'll give a pre-tax income, a pickup of over $16 million.

But of course there's expense in operating the branches, there's intangible randomization, which is not free either, but it's a non-cash expense. All that results in a pre-tax pickup of around $7 million in the first full year, take that divided by our share count, that's where you get the 5% accretion to earnings per share. Of course, the cash accretion is a little higher than that because you back out the intangible amortizations and non-cash expense, and that's the cash amortization actually tied in that and that's what builds (inaudible) intangible looks slightly backed up and gets to the calculation of the earn back period. So hopefully that's some detail that verify.

Collyn Gilbert -- KBW -- Analyst

Yes. Okay. Thank you. I apologize if you had (inaudible) in the slide deck subsequent to the deal slide deck, I guess, I didn't see that.

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

No not at all. We did have that slide deck, but the one piece of that -- and we try to be explicit, but the one piece that there was not made explicit was the fee income.

Collyn Gilbert -- KBW -- Analyst

Okay.

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

And it's just a nice fee income opportunity for us as well. It's not -- there's no increase in fees for the customers as we always kind of tread very lightly in acquisition, which is the normal fee income plus of course the interchange being a little more valuable.

Collyn Gilbert -- KBW -- Analyst

Got it. Okay. And then -- and again if you had this somewhere and I missed it, I apologize. But the deposit runoff that you're assuming or are you (inaudible) deposit runoffs?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

We are seeing some deposit runoff. I think, we're looking at that in the immediate time after close.

Thomas Michael Price -- President and Chief Executive Officer

I think, it's in the first six months we're assuming about 10%, and then we go from there.

Collyn Gilbert -- KBW -- Analyst

Okay.

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, 10% percent annualized rate for a short period of time.

Thomas Michael Price -- President and Chief Executive Officer

That's right. Hey, Collyn...

Collyn Gilbert -- KBW -- Analyst

Okay.

Thomas Michael Price -- President and Chief Executive Officer

...just two other things. I mean, we do feel that in the four previous deals and you've seen the impact on profitability over the last three or four years, they're pretty conservatively stated, we're going to put a commercial bank in on top of this. And then another thing is, with a lower loan to the deposit ratio that's 90%, and we had already budgeted in a number of -- should I say specials with deposits to grow our deposits and fund our balance sheet at the requisite pace. I think, this gives us some optionality as it relates to that and that's not quantified in our model, but will invariably have impact on our own internal budget. And -- so this is -- this deal sets up pretty nicely for us like with the others hopefully to outperform the projections.

Collyn Gilbert -- KBW -- Analyst

That's great. Okay. That's really, really helpful. Thank you. And then just one final question. You guys are seeing some good -- you saw it this quarter and it sounds like in your outlook to some good consumer activity, which is a little bit different I feel like then what we're seeing from some of your peers; anything in particular that's driving that? I mean, maybe to your point Mike is it the newer markets of Ohio and you're just getting more household, but just you seem to be doing better than your peers on that, and I'm just curious if you had more color as to what's driving that.

Thomas Michael Price -- President and Chief Executive Officer

Yes. And our (inaudible) to say that. Our indirect auto business with an inverted yield curve, it gets a little attract -- more attractive on the spreads. It's kind of a nuance of the business. We've been in the business for 20 years. It's been a pretty consistent performer for us on the credit side, so it's never make this there. We know the dealers well, a lot of times before plan them. And that business as we've moved into Ohio, we've grown with our kinds of dealers there. And again, I know it's a business that can cause some concern, but nevertheless it's one that we've been pretty good at for a number of years, so we don't feel like we have credit risk there. We just -- we need to get appropriate returns and those returns are getting a little better. And -- so that's -- that was a bit of a shot in the arm. But it's pretty broad based from C&I to construction to commercial real estate to the branches are doing a better job chain. Jim and the team on the small business side are getting after. For now, I think, the number two in Dallas, SBA lender in Cleveland, and the number two at the end of last fiscal year-end in Pittsburgh, so we just made good strides in the core businesses.

Collyn Gilbert -- KBW -- Analyst

Okay. That's great. That's very helpful. I will leave it there. Thanks guys.

Ryan M. Thomas -- Vice President, Finance and Investor Relations

Thank you.

Operator

The next question comes from Daniel Cardenas with Raymond James. Please go ahead.

Daniel Cardenas -- Raymond James -- Analyst

Hi. Good afternoon, guys.

Ryan M. Thomas -- Vice President, Finance and Investor Relations

Hi, Dan.

Daniel Cardenas -- Raymond James -- Analyst

So congrats on a good quarter and on the deal. As we talk a little bit more about your expectations on the loan growth side, could maybe you give us a little bit of color as to whether or not you're seeing a pullback on competitive factors, is that kind of -- is that what's giving you some encouragement that, that you can see loan growth kind of where you expected to see for 2019?

Thomas Michael Price -- President and Chief Executive Officer

I wish I could say that, but I'm not sure we see that. We think it's pretty tough. We probably like a lot of people. We're -- we were preparing for maybe tougher economic times. And we want to perform well through the next cycle, so we're very mindful of credit and how this bank will do through the next credit cycle. But as long as we can get some good GDP growth, that benefits us all, although that has been dampened a bit just over the last quarter or two.

So it's tough and I think we're just doing a better job of finding. Quite frankly, we have more salespeople, I mean, we've invested a lot in corporate banking FTEs, probably 10 to 12 FTEs just in the last year, year and a half, so we have more producers too.

Daniel Cardenas -- Raymond James -- Analyst

Good. And then how about on the deposit side, are you starting to see competitive factors abate or is that not necessarily the case?

Thomas Michael Price -- President and Chief Executive Officer

It's -- I don't know that they've abated. I would say our sales culture under Jane and others leadership has just continued to grow and the importance of gathering deposits. And our talent in the branches I think, has gotten stronger and our branch model, we have our branch managers go out and really call in small and business customers. When you look at our deposit book, we're about 25% non-interest bearing and two-thirds or 66% of that non-interest bearing is business. And we're just going out, calling on people and getting the business. Jim, you want to add anything there?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. I don't think (inaudible) right to your question about deposit pressures, you may have seen a little bit on the edges some people are pulling back some of the crazier specials, but still the competition for the next incremental deposit dollar remains intense. And so that's -- that is something that we're -- we watch very closely.

Daniel Cardenas -- Raymond James -- Analyst

Good. And then just one quick model question here, how should I'll be thinking about your tax rate for the remainder of 2019?

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

19.1%.

Daniel Cardenas -- Raymond James -- Analyst

All right. Thank you, guys.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mike Price for any closing remarks.

Thomas Michael Price -- President and Chief Executive Officer

Hey, just thank you. As always, we appreciate your interest in our Company. I know, we'll be with a number of you over the course of the next quarter or two and really look forward to that. Thank you again.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 36 minutes

Call participants:

Ryan M. Thomas -- Vice President, Finance and Investor Relations

Thomas Michael Price -- President and Chief Executive Officer

James R. Reske -- Executive Vice President, Chief Financial Officer and Treasurer

Frank Schiraldi -- Sandler O'Neill -- Analyst

Steve Moss -- B. Riley FBR -- Analyst

Russell Gunther -- D.A. Davidson -- Analyst

Collyn Gilbert -- KBW -- Analyst

Daniel Cardenas -- Raymond James -- Analyst

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