Q2 2023 First Commonwealth Financial Corporation Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the first Commonwealth Financial Corporation second quarter 'twenty three.
Earnings release Conference call.
We'd now like to turn the call over to Ryan Thomas Vice President of Finance and Investor Relations. Please go ahead.
Thank you Brandy and good afternoon, everyone. Thank you for joining us today to discuss the first Commonwealth Financial Corporation second quarter financial results.
Participating on today's call will be Mike price, President and CEO , Jim Rescue Chief Financial Officer, Jean Gubins Bank, President and Chief revenue Officer, and Brian Carroll, Our Chief Credit Officer.
As a reminder, a copy of yesterday's earnings release can be accessed by logging onto F. C banking dotcom and selecting the Investor Relations link at the top of the page.
We have also included a slide presentation on our Investor Relations website with supplemental financial information that will be referenced during today's call before we begin I need to caution listeners that this call will contain forward looking statements.
Please refer to our forward looking statements disclaimer on page three 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 GAAP reconciliation of these measures can be found in the appendix of today's slide presentation with that I'll turn it over to Mike.
Hey, Thank you Ryan and welcome everyone.
Net income of $42 8 million translated to 42 cents of earnings per share, which beat consensus estimates by a penny.
Our headline figures include a 1.45% core ROA.
Two 8% efficiency ratio in the net interest margin of 3.85% on a linked quarter basis. Our net interest income was up $3 5 million to $98 $1 million. Despite some NIM contraction as.
A full quarter of the centric ex acquisition hit the income statement loans grew and average deposits increased.
Provision expense was up compared to last quarter, but remained low at $2 $8 million with a fairly healthy reserve of 152% net charge offs were $8 7 million to $7 1 million or 82% was reserved for through purchase accounting marks.
With the centric acquisition and thus did not hit the income statement.
Noninterest or fee income was up some $1 $6 million to $24 5 million for the quarter due to increased mortgage gain on sale income and debit card tailwind not only where mortgage originations up seasonally over last quarter, but the proportion that we sold grew to 72%.
Momentum and spread and fee income was offset by noninterest expense, which rose $3 2 million to 66.
Million dollars.
Primarily due to increases in hospitalization expense incentive expense and cost associated with the mailing.
Revised deposit agreement to our customers' loan growth of $148 million or six 9% annualized was at the high end of our guidance and was led by the commercial categories of construction equipment finance and commercial real estate for the quarter average deposits from <unk>.
March to June we're up over 10% excluding centric balances.
Consciously actively manage our loan growth to match our deposit funding capabilities.
Our new capital region, formerly centric bank, we are tracking to our retention as well as our expense targets recall that we announced the centric acquisition late last August had regulatory approval in less than 90 days and closed and converted the bank in the first quarter regionally Northern Ohio Pittsburgh.
Berg and community led the way for us with second quarter deposit and loan growth.
Some further reflections on the second quarter follow.
Our deposit gathering activities and focus continues to improve on top of an already strong depository that is both granular and diversified in the second quarter, we became less aggressive than competitors with our savings and CD pricing <unk> and still solid growth in those categories.
Our online deposit account opening continues to improve with more than 20% of our recent personal checking accounts originated through the channel. This has more than doubled from the same period last year. This has been no overnight success story and just to be clear. This is an in market checking account.
Acquisition strategy that we have worked on for several years, we're pleased with the progress in our equipment finance and the type of assets and spreads that were beginning to add to our portfolio also our gain on sale mortgage and SBA businesses, coupled with other indirect business, our indirect business have subdued volumes, but we continue.
To improve our efficiency in those businesses.
Requiring better pricing for example, new indirect loans came on the books at 145 basis points higher than those that ran off in the second quarter Lastly for the fifth year in a row. We are proud to have earned the recognition by Forbes as one of the world's best banks and also one of the best in the state.
Thanks in Pennsylvania with that I'll turn it over to Jim <unk> our CFO .
Thanks, Mike.
Mike started with earnings so I'll start with a balance sheet update.
Average deposits average deposits excluding acquired centric deposits.
Grew at an annualized rate of 10, 8% compared to the first quarter on an unadjusted basis average deposits were up 20%.
That's because we only had the acquired centric balances on our balance sheet for two months of the first quarter.
Through June 30, we have retained 93% of the acquired center deposits, which is within expectations.
Essentially the decline in acquired centric deposits was offset by growth everywhere else.
End of period deposit balance is relatively flat in the quarter.
Even though deposit balances were generally steady like most banks, we can see we continue to see changes in the mix of deposits the shift in the mix from noninterest bearing and savings.
Cds and money market accounts increased the cost of deposits by 42 basis points from 73% to 114 basis points.
While deposit costs grew they did so at a slowing rate and in fact, the pace of increase has had since has been slowing since the centric acquisition closed on January 31.
The cost of deposits grew by 31 basis points in February of this year, but only by 14 basis points in March.
The increase has continued to slow over the three months of the second quarter by <unk> 10, and eight basis points consecutively.
Non maturity deposits cost 145 basis points at June 30, resulting in a cumulative through the cycle beta of 28%.
And we were encouraged to see that the ratio of noninterest bearing deposits to total deposits was.
It was 28, 7% at June 30, little changed from 29, 4% last quarter.
So while deposit costs were 42 basis points.
Our cost of funds was up 48 basis points, while loan yields only went up 31 basis points, leading to 16 basis points of compression in the net interest margin to 385%.
The second quarter NIM received a benefit from centric marks. So this was largely offset by the suppressive effect on the NIM of our maintenance of about $250 million of excess liquidity in the second quarter.
We ended the quarter with a $3 $7 6 million.
For the month of June , but the anticipated 25 basis point fed hike today should boost NIM by about five basis points.
Back into the low <unk>.
Looking ahead, our NIM projections indicate relative NIM stability.
And slow steady growth in net interest income based on our rate forecast that calls for short term rates to peak at five 5%. This summer.
Is it about 5% by the end of this year and fall in 2020 for taking pressure off of deposit rates and bringing some steepness back end of the curve.
I'll turn it away if rates stayed higher for longer NIM will come under increasing pressure from rising deposit costs.
Asset yields will hold up so even in that scenario, our NIM outlook is relatively stable.
However, I would caution that depositor behavior has proven difficult to predict which should suggest a wider range of potential outcomes than normal.
Noninterest expense was up due to hospitalization incentives and deposit disclosures.
We self insure our health care for our employees. So our hospitalization costs always show some volatility based on the actual health experience of our employees, but we believe that our health care costs are lower in the long run.
The incentives were up only because there was reversal last quarter and accruals this quarter return to normal levels.
And the cost for customer disclosure was first any updated deposit agreements to our customers in anticipation of coming under CFPB to supervision due to crossing $10 billion in total assets.
We were buying back shares opportunistically in the second quarter when the price dip below $12 50 per share as we try to balance using internal capital generation to support loan growth and capital ratio expansion against the opportunity to retire shares cheaply.
We repurchased 766393 shares in the second quarter at a weighted average price of $11 92.
Tangible book value per share increased from $8 13 to $8 24.
As retained earnings growth outstrips any increase in the <unk>.
Increased eight OCI, however, brought our tangible common equity ratio down slightly from seven 9% last quarter to seven 8%, but our CET one ratio remain unchanged at 10, 8%.
$50 million of the $100 million of subordinated debt, we have outstanding at the bank level became callable at June 1st I went from $4, 875% fixed to floating at a rate of $184 five basis points over three months LIBOR of about five 5%, which will convert to sulfur of course.
After next payment date.
And with that I will turn it back over to Mike.
Operator open the line for questions.
The floor is now open for your questions to ask a question at this time. Please press star one on your telephone keypad, if at any point you'd like to withdraw from the queue. Please press star one again, we will now take a moment to compile a roster.
Okay.
Our first question comes from the line of Daniel <unk> from Raymond James. Please go ahead.
Hey, good afternoon guys.
Afternoon.
I guess first.
Just following up on the on the margin guidance.
The relatively stable margin I got it.
If we don't see as many.
Get cuts or we don't see as many hikes here sorry.
Sorry, if we do see the hikes apologize.
But with the kind of.
Stable margins stable rate environment.
Are you, suggesting that you'll continue to see.
Asset yields climb of around the same rate that you.
You see funding.
Funding cost rates rise.
Is that what you're saying.
That's definitely part of the equation Dan This is Jim.
Yes.
Fed hike I guess, if I just did hikes and while we're on this call a fed hike.
Five basis points, we've been putting on new loans on the books at around 7% through the second quarter and Thats been replacing.
Replacing loans that have run off the books in the low sixes.
If rates go to five in a quarter they have today and they stay in the area.
5% by year end, we will continue to see those positive replacement yields, giving us benefit largely through that through the end of this year.
And then part of that NIM stability comes from the way, we've constructed a balance sheet with half floating fixed a lot of the loans that we grant reprice upwards will be sticky on the way down that benefits margin and give us a little bit more stability.
Got it okay and what are you assuming in terms of loan growth at this point.
Our guidance will continue mid single digit we surprised a little bit on the high side of this.
Past quarter, but we.
There's plenty of revenue engines, and if anything we're more.
Metering loan growth just a bit.
To be kind of equally yoked with deposit growth.
Okay, well that was my next question so.
Youre expecting deposit growth to be in that same range it sounds like and for the loan to deposit ratio to be relatively similar.
Similar to what it is now.
My last question.
Just on the new Cds as you build up those balances what rates were you are you putting them on in the second quarter and what are you expecting to be putting one in the third quarter.
Yes describe any of the specials, we have in the market right now we have a special at four 8%.
So the incremental Cds will come out of that that's not the full story because we.
We have a lot of CD maturities like anyone else, England as Cds mature about half will come on at the current market rate about half for Roper rack rate. So the incremental cost of those Cds is close to half of that incremental rate.
That helps the overall cost of the new Cvs their CD growth that brings the overall average down.
Got it okay.
Well I appreciate that Jim and all the color on my questions. Thanks, guys.
Thanks, Thank you.
Our next question comes from the line of Carl Shepard from RBC capital markets. Please go ahead.
Hey, good afternoon guys.
Hey, Carl.
Al I wanted to pick up on the deposit cost conversation there in the Cds.
Jim you mentioned slowing deposit rate increases through the quarter can you just get a little more color around that is that just a function of getting further away from the last hike before today or is there more to it.
I think there is an effect there we talked about it anecdotally and then these are these kind of numbers give us confidence in what we're seeing.
Just some observations we have theres, a big effect when consumers wake up and go from zero percent to 400 basis points and there's just so much of that in the first quarter seem to be very slow.
Not existed in the first half of last year picked up steam in the third quarter more steam in the fourth quarter, but really full on in the first quarter of this year. So a lot of that repricing took place.
And there is still incremental repricing, but when someone says we don't want 4%. They won for the quarter. The increments are smaller.
And so thats kind of what we've been observing anecdotally.
Please.
I don't mean to mislead that there is still upward pricing pressure.
Yes.
I think as Ive had a falling rate scenario. The fed starts cutting rates that pressure will come off credit relatively quickly, but there's definitely some upward pricing pressure. We're just really pleased to see that pace slowing down and I think that the idea that theres a smaller increments of repricing helps explain the story.
The team meets every other week.
Jim Jane <unk>, our bank President our heads of our lines of business and normal demaree, our product and Chief information officer to discuss that and we are making game day decisions. All the time, we have room to be more aggressive with pricing in the second half of the year than we certainly were in the second quarter need be.
I would build on that answer I think our deposit pricing relative to the market was fairly aggressive in the first quarter and less so in the second.
No.
The ship turned slowly so some of the second quarter growth, probably got some of the benefit of that first quarter pricing.
And that kind of can that continue.
So.
So it makes sense, we have room to be more aggressive if you chose to be.
Okay. That's helpful.
Comments make a lot of times, there's been a lot of time tightening up my own bank accounts in the first quarter, but.
Yes.
Switching topics I guess.
Looks like a good quarter for equipment finance.
In the past you had mentioned 200 million balances. This year is that still kind of a fair expectation and I'll bet.
Business seems like its really up and running any longer term expectations, you want to put out their refresh.
Jan why don't you take that one.
Thanks for the question.
I think we will still come in around the $200 million, we might be a little bit.
On either side of that though as we calibrate how much indirect.
Equipment finance paper, we want to buy.
Based on margin, but the businesses is coming along nicely and we're pleased with that.
Don't think that.
And prepare to talk much about next year or beyond.
Because it's just so capital.
So.
Tied to.
What's going on in <unk>.
Capital replenishment for our commercial clients.
Thanks, Dan.
Just quickly I think the yields in that business have been very nice coming in at over 7% with new production yields, but as Jamie mentioned with the mix shift continues to shift from indirect paper to more direct paper that you don't get even better and the duration is fairly steady it is not.
By asset class and experience with a lot of prepayments and so the duration is right around five years, which should help with a falling rate environment.
Thanks for the help with everything and good quarter.
Thank you.
Our next question comes from the line of Michael Perito from K B W. Please go ahead.
Hey, good afternoon, guys. Thanks for taking my questions.
You bet.
Just I was just kind of curious where are you guys tracking on and I apologize I missed this I got a couple minutes late but where are you guys tracking on the Opex side as you look to the back half of the year end and just kind of maybe philosophically as we think to 2024, you honestly the NIM environment is more challenging.
And I know you guys have really kind of done a nice job of investing in expanding product without really seeing too much appreciation the opex base, but maybe an update there both near term and kind of just high level, how you're thinking about the rate of investment.
Would be great. Thank you.
We've been good expense managers over the years, and we can pull a lever to where not and we're keeping even some of the businesses.
Is that a swooned a bit we think bill pay nice dividends for us as the economy continues to recover.
I think right around the 66 is a good figure we could beat that or be a little higher.
How does the affiliate Jim that's about right I think your question Cmos have a flavor of.
The IRR, we get on investments and the returns we get on those we think we've been really good at doing this and kind of good managers and good stewards of capital as we invest in our mortgage business and built that out and now completed the finance business to lift out that we have built that up.
So I think those investments where they will more than pay for themselves in the long run.
I would suggest that your question is that right yes.
Yes, no that that all that's all very helpful and makes sense.
It sounds like kind of hopeful to hold the line, maybe a little upward pressure here, but kind of from a high level I would say.
Business as usual, but we will continue to invest with the focus being to longer term generate the positive operating leverage.
Kind of not slow down too much given the environment and some of the challenges first.
Murray.
It is.
We are bullish longer term on the growth of our company.
We feel like we can have steady deposit and loan growth longer term.
I think theres some room for an uptick in our fee businesses, particularly SPN mortgage.
<unk>.
Regionally, we feel like we can improve in each of our six markets.
Focus their equipment finance James spoke to.
Just we have some businesses I mean consumer.
Consumer lending right now HELOC loan is is subdued but just yes.
I think the.
The last two years, we grew in every market and we grew.
Every line of business and we're certainly not there right now the commercials kind of leading the way indirect auto and a little bit of mortgage but.
We can hit on more cylinders, we need to find the funding.
And.
We just want to be a bank that self funds and.
And maintain our competitive advantage on the low cost depository, but.
We're bullish on the future of our company and what we've built and we don't feel like it's fully realized yet in terms of.
The capacity within our communities.
Sure.
Helpful. Thank you guys and then just secondly for me if you think about the back half of the year is there any room based on your outlook and what you see today and maybe some rate stipulation stabilization that youre assuming in your <unk>.
Your guidance.
For some of these fee items that have kind of worked against you in the first half of the year to rebound whether thats swaps mortgage.
<unk> been trusted looked a little bit lower on the way you were run rating in the back half of the year I mean any line of sight on some rebound there that that could be helpful or or would love your thoughts.
Yes, I think SBA.
We're about $45 million through six months versus.
63.
Last year.
And pretty decent pipeline the gains on sales are a little bit lower.
And then they were.
A year ago, but nonetheless, the pipeline is stronger there and.
Perhaps that could be.
A tailwind and in mortgage saw a little better six or 700000, I think 600000 in the second quarter improvement I think rates are being more accepted by clients.
We're seeing a high volume of Prequalification activity, the key is inventory and.
The fact is the majority of homeowners.
They have low rates.
So but.
Yes, I think once rates fall into the.
$5 range.
We could see an influx of inventory.
So maybe we can move the needle a little bit there, but we're really focused on the higher margin commercial businesses to grow.
<unk>.
B the important factor in our.
Our mid single digit loan growth because the spreads are just quite frankly more attractive.
Got it.
Helpful. Thank you guys for further color today and for taking my question.
Thanks.
Our next question comes from the line of manual Nevada from D. A Davidson. Please go ahead.
I think a lot of my questions have been answered.
Can you kind of just return to the the slug of net charge offs that came from centric again just kind of.
How that came about.
Yeah, I'll, let Brian take that foot.
I think we did a pretty good job with the Mark upfront and the credits that we identified or the credits that were working through Brian why don't you take the rest of that yes, we reported $8 $7 million of net charge offs of which about $7 $6 million were associated with the century portfolio.
Seven one had been previously reserved for.
As we work through the portfolio as we do our annual lines sheet review identified credits appropriately marked credits and then take actions on those credits that we've moved to either non accrual or work out you saw those net.
Charge offs for the second quarter be elevated.
Is there a pipeline for more of these that are kind of already reserved.
Wondering.
We can see what Joe just wondering what the expectations are.
We do have credits that are on non accrual that had been reserved for that are in special assets and being worked at.
Okay.
That's actually that's actually it for me. Thank you.
Alright, thank you.
Our next question comes from the line of Matthew Breese from Stephens. Please go ahead.
Good afternoon.
Hey, Matt.
Hoping to start on the NIM.
I believe purchase accounting contributed 14 basis points to the margin. This quarter could you give me some sense for where that should shake out over the next handful of quarters does that 14 bps a good run rate.
No I think it's great. Great question I think it is going to come down a little bit we cannot calculate eight or nine basis points next quarter, and then kind of fading out a little bit.
Signed a one basis point a quarter after that so part of the offset though is if you recall back in the prepared remarks and also in the text of the earnings release was that suppressive effect on the NIM of all of our excess cash on the balance sheet, we are starting to invest that and so.
Right now it's economically awash, because we borrowed at a certain rate we put in Gabon deposits at almost the exact same rate interest pumps at both sides of the balance sheet as persons that NIM ratio, but.
But as we invest in debt securities pick up 50 basis points or more maybe we will see what happens after today's high maybe a little more than that that will help a little bit with margin. So those two factors kind of.
We will continue to work offset each other.
Okay, and I know, that's something you mentioned last quarter, maybe starting to put some money back to the securities portfolio. Obviously, it was down one 1% point to point.
Should we start to see some securities growth in the coming quarters.
Yes, we're hoping we did and we did buy some securities in the second quarter, we just had more runoff as well offsetting.
Now you should use you definitely see some purchases in the second half.
Good afternoon.
Bob a couple of days ago.
He will then get a little more attractive and we're seeing more opportunity there.
Yes.
I was hoping you could also comment on updated thoughts around full cycle deposit beta at this point. If there is any sort of range you can provide.
Then considering your disclosures in the 10-Q about rate sensitivity NII impact from particularly from a 100 basis point cut.
I think it puts to less than 2%, which is a bit surprising given the kind of the construction of the balance sheet.
I guess I wanted some sense for whether or not that kind of impact to NII in 2024 from a 100 bps of cuts as a reasonable point to work off of call. It 5% to 10 bps of NIM pressure on 100 bps of cuts.
So.
Couple of questions. There I'll start with the interest rate risk I would start by saying all our disclosures in the 10-Q are accurate and ethic concrete categorical statement, but those are parallel shifts and so what we're trying to run the guidance I'm trying to give you our non parallel shifts so based on little more realistic view.
Of where markets are going to go in a realistic depends on the perspective of the beholder I suppose.
What we are using our Moody's forecast that we purchase and we use a weighted forecast and we've been doing this pretty consistently so the baseline forecast I guess, 40% weight and then we put some weight on an upside or downside and we don't change those rates, we think that gives a.
Perspective over time and with that calls for a non parallel shift next year. So yes. The front end of the curve comes down, but the Midland stays up and so a lot of the.
Loans that we have priced the Midland curve don't reprice downward and you end up with a steeper curve environment and that is generally positive for banks that kind of environment all of us banks life. We've.
We make more money with particularly of a subsea some steepness of the yield curve.
All of those things are kind of us working together to create a projection that calls for NIM stability, even when not a parallel shift as published in the Q shows asset sensitivity and downward pressure in a falling rate environment.
And all of that I would I would say again.
Caveat I put in my prepared remarks that depositor behavior is very difficult to predict and so.
We will continue to provide updated guidance, but they're also there to your assumptions.
<unk> that go into it and that's what the whole industries dealing with there was another part to your question, though and I'm forgetting what it was right now if you could go in prior quarters. We've discussed the outlook for a full cycle deposit beta I believe we've kind of oscillated between 20%, 25% I'm curious your thoughts where that is now it's higher now it's higher now we would say now 32%.
But I want to be clear about this and I'm really glad you asked because I think there are some industry confusion over what the cumulative through the cycle data means we interpret that as.
Through this hiking cycle. So today's hike from the fed as the last of the hiking.
That means the fed raised rates from 25 basis points to 525, and Thats 500 basis points of that.
That's the denominator because thats through the cycle.
I don't know that the industry is very consistent on how they calculate their denominator everyone. I. Just wanted to also say just give me the beta.
So when I tell you, 32%, that's my denominator and so when I look forward I say.
Non maturity deposits will go up to like one <unk> 160. They started five that's $1 55, Undividing, a 500 500, because thats when the hiking cycle turns.
Other practice, many different I would love. It if you guys would ask for piercing questions and all the other great Chicago to finding with that answer.
Well.
Let's try it a different way.
Do you expect deposit costs to peak over the next four quarters and non maturity deposits I think youre going to be about 160.
Okay.
Well, let's say fee.
Interest bearing savings and money market.
Interest bearing checking savings money market.
Okay.
Okay.
A couple of follow ups from me for sure any change or update to the estimated impacts from durbin commencing a year from now.
No we've been saying about $13 million and change that's what's disclosed in the Q. That's the lost interchange income than we've always disclosed and we've been asked a couple of million dollars of soft costs. You saw some of that this quarter with a half million dollars. We had for disclosures that's kind of a soft talk tough cost that we've been talking about for years.
That's a onetime cost, though that one yes right.
So, but those estimates are.
In line with what we've been saying in the past in our view on that hasn't really changed.
Got it okay.
Last one I noticed in the presentation you have 90, I think it is $97 million of office commitments scheduled to mature over the next 24 months.
Im curious have you reached out to those borrowers stretch those credits and just curious how do they hold up on rate resets.
Ladies environment and what are some of the major stress points or highlights from that analysis. If you have any yes, we're touching those customers and align.
A line review sheet exercise in May we're touching them.
And an annual review process and Brian why don't you fill in the blanks.
Yes.
For each one of the loans that come due in the next 24 months, we have a plan around each one so our relationship managers meet with their clients, we discussed with the upcoming maturities might look like.
<unk> talked to them well in advance about.
Interest rate reserves, but potential re sizing what it appraised on a new appraisal may look like and so we do have.
Very clear plans.
For each one of our borrowers.
Yeah.
Understood any any red flags as you've kind of worked through those.
Any any sort of.
Unfortunately outcomes.
Yes. So we have as you know two credits that we put into non accrual back during the pandemic to office credits those credits have been there. We continue to work through those full over $15 million is an outcome of the line sheets, we downgraded for credits.
Of those four credits two are in the office space and.
So those credits are both paying as agreed.
Again, we were working with with the borrowers and have plans for each of those credits.
And.
We expect to resolve those overtime.
Got it okay.
Thats all I had I'll leave it there. Thank you for taking my questions.
Thanks, Matt.
Our final question comes from the line of Daniel Cardenas from Janney Montgomery Scott. Please go ahead.
Hey, good afternoon guys.
Dan.
So going to the deposits.
Just quickly with the move that we saw this quarter on deposit balance.
Was there any significant movement customer balances and the number of customers.
Substantial increase or decrease this quarter.
I would say we had budgeted for a decrease.
With the centric acquisition, and our new capital region and Thats.
We are within our budget there for the first year and so there was a downdraft there and we expected that that's part of acquisition activity I think in the rest of the book No. We felt good about the growth there and we did feel like.
Having done six acquisitions here or.
Branch deals.
They tend to bottom out in the first six months to 12 months.
And then you start building.
In earnest and we will get there as well as to stay our retail on our branch side of.
Okay.
The centric acquisition has gone quite well and we feel good about the turnaround and the focus on small business already there.
Yeah, and I would just add.
Ed.
I think your question, China is trying to get to a number of accounts.
Michael you talked about balances recruited exclusive in terms of balances with central required but number of accounts is relatively stable in the second quarter.
There wasn't any noteworthy erosion or anything like that.
Alright, okay.
Then.
In terms of acquisition, what's what's the environment like.
Right now not only for whole banks, but maybe four.
Asset subset.
We're not seeing a lot I think there's a lot of conversations out there.
<unk> been in and but we're not seeing a lot of opportunity at this point and do you have anything you want to add no I think thats right I think.
This is this market color commentary there.
Can meet anywhere, but I think probably smaller banks are feeling more pressure than larger banks and so maybe there'll be more opportunity opening up in the future as they face more funding pressures with maybe more liability sensitive balance sheets, so that might open up opportunity that pronounced.
Yeah, so pretty quiet.
But we still have the biggest opportunity we're working on right now and that's the deal we just did.
Closing and converting the bank is relatively easy.
And making sure that you can play offense and hit the ground running a year later.
So that has a lot of our time and energy and focus right now.
Okay.
Last question for me, how should how should I be thinking about your tax rate in the back half of this year.
The hair over 20%.
<unk> actual number for you.
But the tax rate.
22, 6%.
It's been under it's been under 20% for a long time, but basically with the acquisition of eccentrics home balance sheets, 10% bigger than the.
The amount of permanent tax differences really didn't change the call we'd always other things. So that's just from a bigger base.
Now it's <unk>.
A little bit closer to the actual federal tax rate 22 six.
Okay, great. Thanks, guys I appreciate it.
I would now like to turn the call over to Mike price for closing remarks.
Thank you for your time and your genuine interest and your good questions.
Help us a lot in terms of how we think about our company we remain enthused about the future of our company. We're proud of the businesses, we built and the way we touched down in communities and the difference we can make with consumers small businesses and larger companies and it's a privilege. Thank you very much.
Thank you ladies and gentlemen, this does conclude today's call. Thank you for your participation you may now disconnect.
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