Todd Clossin: Yes. The suburban nature of it makes us feel more comfortable we’re in what I would call, I don’t mean this disrespectfully, but tier two cities, for the most part, Pittsburgh, Columbus, Cincinnati, Louisville, Lexington, versus what I would say tier one cities like Chicago or LA, San Francisco, and even downtown DC. That’s not really those are mass transportation markets, where people, I think there’s going to be a higher percentage of people working from home, remote, or hybrid long term. So that’s going to have a material impact on those cities, not that the secondary tier two cities aren’t going to be impacted, I think they will be but for the most part, these are all getting your car and drive to work type of markets.
And we’re seeing that hold up better than in some of the bigger cities. The DC part of it again, if you look at our office portfolio, in Maryland, it doesn’t look very much like the rest of our office portfolio. It’s not in downtown DC, we’re not there, yet, we’ve got one loan, which is performing. But that’s not an office market that fortunately aligned good at underwriting to, and they didn’t go into that market, from an office standpoint in any big way. So I think that that’ll benefit us quite a bit. And I also look at the portfolio and how it matures. You get about $40 million a year maturing on that office portfolio each of the next couple of years. So it’s not like we got a big bubble all coming through and maturing at the same time or anything like that.
And we’ve also gotten very good and granular at going out and looking at those and making sure that we got good line of sight to where do we think occupancy is going to be and rates are going to be down the road, right. So don’t see a lot of what I say ghost properties out there where the rents being paid, but there’s no cars in the parking lot type of thing. Because when events going to kind of occur if that’s what the portfolio is consisting of, and we’re not seeing a lot of that. It’s not reported anywhere, but those are the things that we’re digging into ourselves and having our lenders dig into. We’re reviewing every office loan over a couple million dollars to make sure we got really good line of sight into where they’re going to be 2, 3, 4 or 5 years down the road.
So as a result of that, I feel good about where we’re at with it, but we’re not in the in the big tier two cities, or tier one cities and we’re also it’s not a portfolio we are expanding at all right now. And we think that that’s probably going to be the one area for the industry. They will probably get the most scrutiny over the next five years and probably should, quite frankly.
Catherine Mealor: Great. Very helpful. Thank you.
Todd Clossin: Sure.
Operator: Our next question comes from Russell Gunther from Stevens. Please go ahead.
Russell Gunther: Hey, good morning, guys.
Todd Clossin: Good morning.
Dan Weiss: Good morning Russell.
Jeff Jackson: Good morning.
Russell Gunther: I wanted to follow up on those commercial lender conversation a bit. You guys mentioned LPOs are 13% of the commercial pipeline. Did a similar data point in terms of related deposit production or deposit pipeline, and just trying to get a sense for how these hires can help you self fund this sort of high single digit growth?
Todd Clossin: Yes, again, I’ll start off in it. Jeff wants to jump in he’s welcome to as well. We talk about that a lot. We actually and Jeff’s been the one driving this the last two to three months, is having a category on our pipeline that’s going to show deposit pipeline as well too. So that we have that ability to track that. But we are bringing that up. We’re not making loans to commercial real estate C&I, you tend to get the deposits. But we’re not making any commercial real estate loans, really, without a deposit existing deposit part of that or requiring that. And we’ve passed on quite a few loans in the last couple of months that didn’t come with deposit basis. I don’t have a specific breakdown by market in terms of deposit pipeline, other than to say that it’s attached to all of the loans that we’re looking at. But we would expect we’re going to have a deposit pipeline here sometime over the next couple of months. Jeff, would you add anything to that?
Jeff Jackson: Yes. I would agree with what you said. I would also say that our focus on hiring going forward and the LPOs, or if we’re going to add any additional LPOs will all be C&I based. And so we would expect that to increase the percentage of LPO contribution to the deposit pipeline going forward based on just really focused on C&I customers, and then also increasing our treasury products and services. I think we’ve also increased that deposit pipeline, but we are focused on it. But I don’t have the details right now.
Russell Gunther: That’s very helpful. I thank you both for that. And then you have a target for C&I focused hires for this year. And just imagine it might be a target rich environment for you given what sounds like still a pretty healthy appetite to lend. So just kind of curious how you’re approaching that>
Todd Clossin: Yes again I’ll start off if Jeff or Dan want to jump in, we are seeing that. We are getting a lot of phone calls from commercial lenders, teams that want to talk to us because of our funding. So we do see that as a real strength right now. And something that is going to allow us to be able to bring on some top talent, again, we’re being careful about it, we want to make sure that anybody we bring on particularly if it’s a team or something that they’ve got the same credit underwriting approach as we do. And then also, I mentioned earlier an increase of 75 to 100 basis points over where we were pricing things a couple months ago. So we’ve got to be able to have a portfolio of prospects that come with a non-solicit, we’re going to respect that, obviously.
But they have to have a target base, that that’s going to fit what we’re going to want to do, if we’re going to use our balance sheet for that. We are going through a process of bringing additional lenders on but we’re also being very good about making sure that we’re self funding as much of that as possible, potentially all of that, as we’ve done the last couple of years with kind of a reallocation to higher growth markets based upon retirements or underperformers, things like that, and being able to get a higher return productivity per FTE dollar than we have in the past.
Russell Gunther: Great, I appreciate your time. Thank you. And then just the follow up would be to the office discussion. Appreciate the color there. you guys have any observations you can share from updated appraisals in terms of declines in value, just kind of .
Todd Clossin: Yes. again, I think it’s going to be very, very market specific because you don’t have much in the way of any problems in the office portfolio. We haven’t had to go out and get a lot of reappraisals and things done, but we do know cap rates have changed and similar to what I think you saw on the hotel portfolio two to three years ago. I think it’s a much different environment. I talked about that for a second. I think with the hotel portfolio, it was a deep drop and then a comeback based upon the virus and vaccines and all that kind of stuff. And that portfolio is kind of back to normal. With the office, you’ve got a couple of things going on. You got the pandemic related aspect of things. But you’ve also got more of a structural impact that’s going on with the work from home which maybe it bounces back a little bit.
But I think a certain part of that is permanent. So whereas I don’t think hotels would be permanently impacted. The office space, I think will be permanently impacted to some degree. So I think we’ve got to look at it a little bit differently there. So I do think having the portfolio reappraise, particularly if you have larger properties, or those that start to fall down in the risk grades, if they’re having difficulty making payments. I do expect to see a fairly significant drop in values on those just anecdotally, we’ve seen one or two out there in the markets that have sold for less than liquidation value in terms of what liquidation value might have been just six months ago, and they’re selling for less than that. So I do think that there’s going to be some risk there and having a loan to value the levels we’ve had in the 60% range, I think it’s going to be important because you may find yourself 80% loan to value in two to three years on a troubled property or higher.
Russell Gunther: I appreciate the color, guys. That’s it for me. Thank you.
Todd Clossin: Sure.
Operator: The next question comes from Daniel Tamayo from Raymond James. Please go ahead.
Todd Clossin: Good morning.
