Civista Bancshares Inc. Q2 2024 Earnings Call
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Operator: Before we begin, I would like to remind you that this conference call may contain forward-looking statements with respect to the future performance and financial condition of Civista Bancshares Inc., which involve risks and uncertainties. Various factors could cause actual results to be materially different from any future results or requests or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during the call.
Speaker Change: Before we begin I would like to remind you that this conference call may contain forward looking statements with respect to the future performance and financial condition of the Vista Bancshares, Inc. That involves risks and uncertainties various factors could cause actual results to be materially different from any future is.
Speaker Change: All are expressed or implied by such forward looking statements. These factors are discussed in the company's S. E C filings, which are available on the company's website.
Speaker Change: The company disclaims any obligation to update any forward looking statements made during the call. Additionally management may refer to non-GAAP measures, which are intended to supplement but not substitute the most directly comparable GAAP measures. The press release also available on the company's website contain stuff.
Operator: Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute the most directly comparable GAAP measures. The press release, also available on the company's website, contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures.
Speaker Change: Financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures.
Operator: This call will be recorded and made available on Civista Bancshares' website at www.civb.com. At the conclusion of Mr. Shaffer's remarks, he and the Civista management will take any questions you may have. Now, I will turn the call over to Mr. Shaffer.
Speaker Change: This call will be recorded and made available on service. The Bancshares website at Www Dot C. I V B dotcom.
Speaker Change: At the conclusion of Mr. Shapers remarks, he and the management will take any questions you may have.
Speaker Change: Now I will turn the call over to Mr. Schafer.
Dennis G. Shaffer: Good afternoon. This is Dennis Shaffer, President and CEO of Civista Bancshares Inc., and I would like to thank you for joining us for our second quarter 2024 earnings call. I'm joined today by Rich Dutton, SVP of the company and Chief Operating Officer of the bank, and Chuck Parcher, SVP of the company and Chief Lending Officer of the bank. Ian Wim, SVP of the company and Chief Financial Officer of the bank, and other members of our executive team.
Speaker Change: Good afternoon. This is Dennis Shaffer, President and CEO of <unk> Bancshares, Inc.
Dennis G. Shaffer: This morning, we reported net income for the second quarter of $7.1 million, or 45 cents per diluted share, which represents a $700,000 or 10% increase over the first quarter of 2024 and a $3 million decline from our second quarter of 2023. Overall, I was pleased with our quarterly results. As I mentioned during our first quarter call, this is a year of transition for Civista as we look to replace the revenue and non-interest bearing funding from the exited relationship with our income tax refund process.
Speaker Change: Like to thank you for joining us for our second quarter 2024 earnings call I'm joined today by Rich Dutton SVP of the company and Chief operating Officer, The Bank Chuck Parcher SVP of the company and Chief lending officer of the bank.
Speaker Change: Well SVP of the company and Chief Financial Officer of the Bank and other members of our executive team.
Speaker Change: This morning, we reported net income for the second quarter of $7 $1 million or <unk> 45 cents per diluted share, which represents a 700000 or 10% increase over the first quarter of 2024, and a 3 million dollar decline from our second quarter in 2000.
Speaker Change: 43.
Speaker Change: Overall I was pleased with our quarterly results.
As I mentioned during our first quarter call. This is a year of transition for <unk> as we look to replace the revenue in non interest bearing funding from the extra good relationship with our income tax refund process.
Dennis G. Shaffer: As a result of exiting this relationship and continued strong loan demand, our overnight borrowings and brokered deposits are higher than we would like. This higher cost of funding continues to put pressure on our net interest margin. To mitigate some of this pressure, we are undertaking a number of deposit initiatives focused on deepening relationships and attracting newer, low-cost deposits. This all takes time, but these initiatives will help reduce our dependency on higher-interest funding sources and overall funding costs.
Speaker Change: As a result of exiting this relationship and continued strong loan demand our overnight borrowings and broker deposits are higher than we would like this higher cost of funding continues to put pressure on our net interest margin.
Speaker Change: To mitigate some of this pressure we are undertaking a number of deposit initiatives focused on deepening relationships and attracting newer low cost deposits.
Speaker Change: This all takes time, but these initiatives will help reduce our dependency on higher interest funding sources and overall funding costs.
Dennis G. Shaffer: I was also encouraged by the disciplined approach we took in pricing our deposits. This approach, in a still extremely competitive environment, helped us reduce our cost of deposits by four basis points to 210 basis points during the quarter. Our ability to stay disciplined is even more impressive as we continue to see a shift from non-interest bearing deposit products into interest-bearing money market and time deposits.
Speaker Change: I was also encouraged by the disciplined approach we took in pricing our deposits. This approach and its still extremely competitive environment helped us reduce our cost of deposits by four basis points to 210 basis points during the quarter.
Speaker Change: Our ability to stay discipline is even more impressive as we continued to see a shift from non interest bearing deposit products into into interest bearing money market and time deposits.
Dennis G. Shaffer: We continue to have strong loan demand across our footprint. Our loan and lease portfolio grew at an annualized rate of 16% during the quarter. This was organic growth, and we believe it is indicative of the continued strength of our markets and our organization.
Speaker Change: We continue to have strong loan demand across our footprint, our loan and lease portfolio grew at an annualized rate of 16% during the quarter.
Speaker Change: This was the organic growth and we believe it is indicative of the continued strength of our markets in our organization.
Dennis G. Shaffer: We continued our focus on holding loan rates at higher levels to ensure an appropriate return for the use of our liquidity and capital. During the quarter, our overall cost of funding increased by 6 basis points to 2.61%, while our yield on earning assets decreased by 7 basis points to 5.58% as we retained more residential mortgages and relied more on wholesale funding. This resulted in our margin contracting by 13 basis points compared to the first quarter of 2024, coming in at 3.09% for the quarter.
Speaker Change: We continued our focus on holding low rates at higher levels to ensure an appropriate return for the use of our liquidity and capital.
Speaker Change: During the quarter, our overall cost of funding increased by six basis points to six 1%, while our yield on earning assets decreased by seven basis points to 558% as we retain more residential mortgages and rely more on wholesale funding.
Speaker Change: This resulted in a large and contrasting like 13 basis points compared to the first quarter of 2024 coming in at 3.09% for the quarter.
Dennis G. Shaffer: For the quarter, we also experienced an increase in our allowance for credit losses, which was primarily attributable to the strong low growth. Additionally, there was a $500,000 charge-off associated with a discreet fraud-related event that one of our clients experienced.
Speaker Change: For the quarter, we also experienced an increase in our allowance for credit losses, which was primarily attributable to the strong loan growth.
Speaker Change: There was a $500000 charge off associated with a discrete broad related event that one of our client experience.
Dennis G. Shaffer: Earlier, we also announced a quarterly dividend of $0.16 per share, no change from the prior quarter. Based on our July 26 share price of $18.98, this represents a 3.37% yield and a dividend payout ratio of 35.6% for the second quarter. During the quarter, non-interest income increased $2 million, or 24%, from the first quarter and $1.3 million, or 15%, from the second quarter of 2023. The primary drivers of the increase from our linked quarter were $1.7 million in fees related to leasing operations at Civista Leasing & Finance, partially offset by declines in service charges due to changes made last year in how we process overdrafts.
Speaker Change: Earlier, we also announced a quarterly dividend of 16 cents per share no change from the prior quarter.
Speaker Change: Just on our July 26 share price of $18 and 98 says this represents a 3.37% yield and a dividend payout ratio of 35, 6% for the second quarter.
Speaker Change: During the quarter non interest income increased $2 million or 24% from the first quarter and $1.3 million of almost 15% from the second quarter of 2023.
Speaker Change: Primary drivers of the increase from our linked quarter or $1 $7 million in fees related to leasing operations. So this the leasing and finance, partially offset by declines in service charges due to changes made last year and how we process overdrafts.
Dennis G. Shaffer: The primary drivers for the increase from the prior year's second quarter were $1.3 million in fees related to leasing operations, along with increased wealth management fees. Our increases overcame $475,000 in lost income related to tax refund processing fees. Non-interest expense for the quarter was $28.6 million and represents an $866,000, or 3.1%, increase over the first quarter. This increase is primarily attributable to increases in compensation related to annual merit increases, which take effect in April each year. The decrease in equipment expense is primarily due to the reduction of depreciation related to operating leases as they mature.
Speaker Change: The primary drivers for the increase from the prior year second quarter or $1.3 million in fees related to leasing operations, along with increased wealth management Gs.
Speaker Change: Our increases overcame the $475000 of lost income related to the tax refund processing fees.
Speaker Change: Noninterest expense for the quarter was $28 $6 billion and represents an 808 hundred $66000 or three 1% increase over the first quarter. This increase is primarily attributable to increases in compensation related to annual merit increases.
Speaker Change: Which take effect in April each year.
Speaker Change: The decrease in equipment expense is primarily due to the reduction of depreciation related to operating leases as they mature.
Dennis G. Shaffer: Compared to the prior year's first quarter, non-interest expense increased $906,000, or 3.3%. The increase is attributable to our normal annual merit increases, which take place each April, and software expenses related to our digital banking platform. Our efficiency ratio for the quarter was 73.4%, which remains elevated due to the compression of our net interest income and expenses associated with leasing depreciation and our investments in digital banking. Our effective tax rate was 12.6%
Speaker Change: The prior year's first quarter non interest expense increased $906000 or three 3% at the.
Speaker Change: The increase is attributable to our normal annual merit increases, which take place each April and software expenses related to our digital banking platform.
Speaker Change: Our efficiency ratio for the quarter was 73, 4%, which remains elevated due to the compression of our net interest income and expenses associated with leasing depreciation and our investments in digital banking, our effective tax rate was 12, 6%.
Dennis G. Shaffer: Let's turn our focus to the balance sheet. For the quarter, total loans and leases grew by $116.9 million. This represents an annualized growth rate of 16%.
Three of our focus to the balance sheet.
Speaker Change: For the quarter total loans and leases grew by $116 $9 billion.
Speaker Change: This represents an annualized growth rate of 16%, while we experienced increases in nearly every loan category. Our most significant increases were in non owner occupied CRE loans residential real estate loans and real estate construction loans.
Dennis G. Shaffer: While we experienced increases in nearly every loan category, our most significant increases were in non-owner-occupied CRE loans, residential real estate loans, and real estate construction loans. The loans we are originating from our portfolio continue to be virtually all adjustable-rate, and our leases all have maturities of five years or less. During the quarter, new and renewed commercial loans were originated at an average rate of 8.20%. Residential real estate loans were originated at 6.64%, and loans and leases originated by a leasing division were at an average rate of 9.75%.
Speaker Change: The loans, we're originating for our portfolio continue to be virtually all adjustable rate and our leases all have maturities of five years or less.
Speaker Change: During the quarter. It wasn't renewed commercial loans were originated at an average rate of 8.21% residential real estate loans were originated at 664% in loans and leases originated by our leasing division were at an average rate of 9.75%.
Dennis G. Shaffer: Loans secured by office buildings make up 5.1% of our total loan portfolio. As we have stated previously, these loans are not secured by high-rise metro office buildings. Rather, they are predominantly secured by single or two-story offices located outside of central business districts.
Speaker Change: Loans secured by office buildings make up five 1% of our total loan portfolio.
Speaker Change: As we have stated previously these loans are not secured by high rise Metro office buildings, rather they were predominantly secured by single or two story offices located outside of central business districts.
Dennis G. Shaffer: Along with year-to-date loan production, our pipelines are fairly strong, and our undrawn construction lines were $273 million at June 30. Again, we anticipate loan growth to be in the low single-digit range for the balance of 2024. On the funding side, total deposits were mostly flat, declining just $3 million for the quarter. As I mentioned, we do have a number of initiatives in progress aimed at gathering core funding. One of those initiatives is leveraging a new program from the state of Ohio, which announced its Ohio Home Buyers Plus program to encourage Ohioans to save for the purchase of a home in Ohio by offering tax incentives to the depositors and subsidizing participating banks.
Speaker Change: Hello with year to date LOE production, our pipelines are fairly strong.
Speaker Change: Drawn construction lines or 273 million at June 30th again, we anticipate loan growth to be in the low single digit range for the balance of 2024.
On the funding side total deposits were mostly flat declining just $3 million for the quarter as I mentioned, we do have a number of initiatives in progress aimed at generating core funding.
Speaker Change: One of those initiatives is leveraging a new program for the state of Ohio, which announced its Ohio Homebuyers plus program to encourage Ohio is the same for the purchase of a home in Ohio by offering tax incentives to the auditors and subsidizing participate purchased spitting bags.
Dennis G. Shaffer: As part of the program, the state will deposit up to $100 million in low-cost funds at a current rate of 86 basis points into participating banks. At the end of the quarter, we had opened 411 of these accounts on our way to the maximum of 1,000 accounts, and we have made additional progress since then. Another example of such an initiative is that we have historically maintained the cash balances of our wealth management clients and other financial institutions.
Speaker Change: That's part of the program.
Speaker Change: Well deposit up to $100 million in low cost funds at a current rate of 86 basis points into participating banks.
Speaker Change: The end of the quarter. We had opened 411 of these accounts on her way to the maximum of a 1000 accounts and we have made additional progress since then.
Speaker Change: Another example of an initiative is that we have historically maintained the cash balances for wealth management clients and other financial institutions. However, we are currently taking steps that will allow us to hold the cash deposits in our wealth management clients at our bank.
Dennis G. Shaffer: However, we are currently taking steps that will allow us to hold the cash deposits of our wealth management clients at our bank. We expect the rates paid on these deposits will approximate Fed funds less 20 or 25 basis points.
Speaker Change: We expect our rates paid on these deposits will possibly fed funds last 20 or 25 basis points.
Dennis G. Shaffer: Based on the current cash positions, we anticipate being able to move $75 million of that funds into the bank by the end of the third quarter. We continue our measured approach to decreasing rates paid on some of our higher-tiered demand deposit accounts and CD specials. The result of lowering these rates is that costs of interest-bearing deposits decreased by five basis points to 2.75% during the quarter.
Speaker Change: Based on the current cash positions, we anticipate being able to move $75 million of those funds into the bank by the end of the third quarter.
Speaker Change: Yeah.
Speaker Change: We continue our measured approach to decreasing rates paid on some of our higher tier demand deposit accounts and CD specials.
Speaker Change: A lot of lowering these rates our cost of interest bearing deposits decreased by five basis points to 275% during the quarter.
Dennis G. Shaffer: Our deposit base continues to be fairly granular, with our average deposit account, excluding CDs, approximately $18,000. Non-interest-bearing deposit and business operating accounts continue to be a focus. Non-interest bearing deposits and interest-bearing demand made up 37% of total deposits at June 30.
Speaker Change: Our deposit base continues to be fairly granular with our average deposit accounts, excluding the see the east approximately $18000.
Speaker Change: Non interest bearing deposit and business operating accounts continue to be a focus.
Speaker Change: Non interest bearing deposits and interest bearing demand made up 37% of total deposits at June 30.
Dennis G. Shaffer: With respect to FDIC-insured deposits, excluding Civista's own deposit accounts and those related to the tax program, 11.8%, or $352 million, of our deposits were in excess of the FDIC limits at quarter end. However, our cash and unpledged securities at June 30th were $456.8 million, which more than covered these uninsured deposits. Other than $404.6 million of public funds with various municipalities across our footprint, we had no deposit concentrations at June 30th.
Speaker Change: With respect to FDIC insured deposits. Excluding so this is only deposit accounts and those related to the patch program 11, 8% or $352 million of our deposits were in excess of the FDIC limits at quarter end.
Speaker Change: Our cash and Unpledged Securities at June 30th were $456 $8 million, which more than covered these uninsured deposits.
Speaker Change: Other than $404 $6 million of public funds with various municipalities across our footprint, we had no deposit concentrations at June 30th.
Dennis G. Shaffer: At the end of the quarter, our loan to deposit ratio remained elevated. Our commercial lenders, our treasury management officers, and private bankers continued to secure additional deposits and compensating balances from both business and personal customers. This success is attributed to ongoing initiatives, and we are exploring new tools to provide to our sales teams to further support these efforts. We believe our low-cost deposit franchise is one of Civista's most valuable characteristics, contributing significantly to our solid net interest margin and our overall profitability. The interest rate environment continues to put pressure on bond portfolios.
Speaker Change: At the end of the quarter, our loan to deposit ratio remained elevated.
Speaker Change: Our commercial lenders are treasury management officers and private bankers continue to secure additional deposits and compensating balances from both business and personal customers.
This success is attributed to ongoing initiatives and we are exploring new tools to provide to our sales teams to further support these efforts.
Speaker Change: We believe our low cost deposit franchise is one of them. So this is the most valuable characteristics contributing significantly to our solid net interest margin and our overall profitability.
Dennis G. Shaffer: At June 30th, all of our securities were classified as available for sale and had $63.2 million of unrealized losses associated with them. This represented an increase in unrealized losses of $8.6 million since December 31, 2023, and is consistent with our length quarter. At June 30th, our security portfolio was $612 million, which represented 15% of our balance sheet. And when combined with cash balances, it's 22.5% of our deposits.
Speaker Change: The interest rate environment continues to put pressure on bond portfolios.
Speaker Change: At June 30th all of our security.
Speaker Change: Were classified as available for sale and had $63 $2 million of unrealized losses associated with them.
Speaker Change: This represented an increase in unrealized losses of $8 $6 million since December 31, 2023, and is consistent with our linked quarter.
Speaker Change: At June 30th our security portfolio was $612 million, which represented 15% of our balance sheet and when combined with cash balances is 22, 5% of our deposits.
Dennis G. Shaffer: We ended the quarter with our Tier 1 leverage ratio at 8.59%, which is deemed well-capitalized for regulatory purposes. Our Tangible Common Equity Ratio was 6.18% at June 30, down slightly from 6.28% at March 31, 2024. So earnings continue to create capital, and our overall goal remains to maintain adequate capital to support organic growth and potential acquisitions. Although we did not repurchase any shares during the quarter, we continue to believe our stock is a good value.
Speaker Change: We ended the quarter with our tier one leverage ratio at 859%, which is being well capitalized for regulatory purposes.
Speaker Change: Our tangible common equity ratio was 6.18% at June 30th down slightly from $6 two 8% at March 31 2024.
Speaker Change: So this is earnings continue to create capital and our overall goal remains to maintain adequate capital to support organic growth and potential acquisitions.
Speaker Change: Although we did not repurchase any shares during the quarter. We continue to believe our stock is a value.
Dennis G. Shaffer: Our capital levels remain strong, but we recognize our tangible common equity ratio screens low. Our previous guidance remains that we would like to rebuild our TCE ratio back to between seven and seven and a half percent. To that end, we will continue to focus on earnings and will balance any repurchases and the payment of dividends with building capital to support growth. Despite the uncertainties associated with the economy and the expense pressures our borrowers face, our credit quality remains strong, and our credit metrics remain stable.
Speaker Change: While our capital levels remained strong we recognize our tangible common equity ratio screens low our previous guidance remains that we would like to rebuild our TCE ratio back to between seven and 7.5% to that end, we will continue to focus on earnings it will ban.
Speaker Change: Was any repurchases and the payment of dividends with building capital to support growth.
Speaker Change: Despite the uncertainties associated with the economy and the expense pressures, our borrowers space, our credit quality remains strong and our credit metrics remained stable as I. Previously mentioned, we did make a $1.7 million provision during the quarter, which was primarily attributable to funding loan.
Dennis G. Shaffer: As I previously mentioned, we did make a $1.7 million provision during the quarter, which was primarily attributable to funding loan growth and a charge-off associated with a discreet fraud event related to a commercial borrower that suffered internal fraud. Our ratio of our allowance for credit losses to total loans was 1.32% at June 30th, up two basis points from 1.30% at December 31st, 2023. This change is due to the low mix of new production and the quarterly updating of factors within our model.
Speaker Change: Gross and the charge off associated with a discrete broad event related to a commercial borrower that suffered internal fraud.
Speaker Change: Our ratio of our allowance for credit losses to total loans is 1.32% at June 30th up two basis points for one point, 300% at December 31 2023.
Speaker Change: This change is due to the lower mix of new production and the quarterly updating of factors within our own model. In addition, our allowance for credit losses to nonperforming loans is 225% at June 30 of 2024 compared to 247% at March 31st 2024.
246% at December 31, 2023.
Speaker Change: $145 million of the increase in nonperforming loans was attributable to the previously mentioned fraud related events, one of our clients experienced during the quarter.
Dennis G. Shaffer: In addition, our allowance for credit losses to non-performing loans is 225 percent at June 30, 2024, compared to 247 percent at March 31, 2024, and 246 percent at December 31, 2023. $1.5 million of the increase in non-performing loans was attributable to the previously mentioned fraud-related event or one of our clients experienced during the quarter. In summary, we are pleased that our margin compression slowed during the quarter, and our margin remains strong as the steps we are taking to generate more lower cost funding are beginning to bear fruit.
Speaker Change: In summary, we are pleased that our emerging impressions flows during the quarter and our margin remains strong as the steps. We've taken are taking to generate more lower cost funding are beginning to generate results. We anticipate that our loan growth should remain in the low single digit pace for the balance of 2024 as we check.
Dennis G. Shaffer: We anticipate that our loan growth should remain at a low single-digit pace for the balance of 2024 as we temper our growth with lower cost funding. While we have experienced some isolated credit issues, we have seen no systemic deterioration in our credit quality. Overall, Civista continues to generate solid earnings, and our focus continues to be on creating shareholder value and serving our customers and community. Thank you for your attention this afternoon and your investment. And now, we will be happy to address any questions that you may have.
Speaker Change: Our growth with lower cost funding.
Speaker Change: While we have experienced some isolated credit issues, we have seen no systemic deterioration in our credit quality.
Speaker Change: Overall, so this the continues to generate solid earnings and our focus continues to be on creating shareholder value and serving our customers and communities.
Speaker Change: Thank you for your attention this afternoon and your investment now we'll be happy to address any questions that you may have.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear three tone prompts to let you know your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any. One moment, please, for your first question. The first question comes from Justin Crowley with Piper Sandler. Your line is now open.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone you will hear a three time problem.
Speaker Change: Johan has been raised should you wish to decline from the polling protest. Please press star followed by the two if you're using a speaker phone. Please lift the handset before pressing any Keith one moment. Please for your first question your.
Speaker Change: Your first question comes from Justin Crowley with Piper Sandler Your line is now.
Justin Frank Crowley: Hey, good morning, guys, or afternoon, rather. I wanted to start off on the leasing business. Obviously, a pretty impressive quarter here, and I think you guys have warned in the past results here could be a bit lumpy. Wanted to see if you could unpack what drove some of the strength this quarter. Was there anything about pull-forward in revenues or how you're thinking about that business going forward here?
Justin Frank Crowley: Hey, good morning, guys.
Speaker Change: Afternoon, rather.
Justin Frank Crowley: I wanted to start off on the leasing business, obviously, a pretty impressive quarter here and I think you guys had warned in the past results here could be a bit lumpy I'm wanted to see if you can unpack what drove some of the strength this quarter theres anything about pull forward in revenues or how youre thinking about that business going forward here.
Justin Frank Crowley: Can you repeat the question again, Justin?
Speaker Change: Can you repeat the question again Justin.
Justin Frank Crowley: I was just on the leasing business, just given the strong result for the quarter. I'm just curious if any of that revenue, you know, was pulled forward from later in the year or what the best way to think about the run right there is.
Justin Frank Crowley: I was just on the leasing business just given the strong results for the quarter I'm. Just curious if any of that revenue was pulled forward from from later in the year or what's the best way to think about run rate there is.
Speaker Change: Yeah.
Dennis G. Shaffer: Well, I think we'll continue to see continued success within that division; the residual and the renewal revenue that you see, I think, in leasing is lumpy. As we continue to learn about that business, it's just, you know, right now, I think it's hard to predict that revenue as it can be inconsistent. And, you know, from quarter to quarter.
Speaker Change: Well I think we will continue to see continued success within that division.
Speaker Change: The residual and the renewal revenue that you see I think it's in leasing is lumpy as we continue to learn about that business. It's just you know right now I think it's hard to predict that revenue as it is it can be inconsistent.
Speaker Change: And you know from quarter to quarter, you know, they're usually the second half of the year is a little bit stronger, but we're really happy with our with so that's at least they are suggested at least we can finance group.
Rich Dutton: Justin, this is Rich. I mean, the residual income is the thing that just makes it lumpy. Like Dennis said, we don't know when somebody's going to buy out the equipment at the end of a lease. I think, traditionally, we've been pretty conservative in how we price it and carry it. So generally, there's a game. We don't see many losses there. But I've talked to lots of other bankers that own leasing companies, and I don't know how you project or forecast that piece.
Rich Dutton: Yes. This is rich I mean that the residual income is the thing that just makes it lumpy like Dennis said, we don't know when somebody's going to buy out the equipment at the end of the lease I think traditionally we've been pretty conservative in how we price it and carry it. So generally there was a game we don't see many losses there but.
Speaker Change: That.
I've talked to lots of other bankers and old leasing companies in that sense I don't know how you.
Speaker Change: Projected forecast that piece of the revenue.
Speaker Change: Yeah.
Justin Frank Crowley: Okay, but in terms of like, you know, maybe a reasonable expectation for the back half of the year, in light or in spite of the back half usually being seasonally stronger, would it seem that this, you know, what we saw this quarter was sort of an anomaly and not necessarily what you'd expect going forward? Again, I realize it can be tough to predict, but you know, perhaps fees close to, let's say $9 million.
Speaker Change: Okay, but in terms of like you know, maybe a reasonable expectation for the back half of the year in light of or in spite of backup usually being seasonally stronger would it seem that the yeah. What we saw this quarter was sort of an anomaly and you know not necessarily what you would expect going forward again I realize it can be tough to predict but you know perhaps fees close yeah, let's say.
Speaker Change: $9 million.
Justin Frank Crowley: Yeah, if you took out the residual piece, I would say yes, that's probably and could be indicative of what you see going forward. And I don't even have in front of me what the residual piece was for the quarter. I can get, Okay, gotcha. That would be helpful.
Speaker Change: Yeah. If you took out the residual piece I would say, yes, that's probably it could be indicative of what you'd see going forward and I don't even have it front of me what the residual piece was for the quarter I can I can I can get it for you.
Justin Frank Crowley: And then I guess just on the expense side of things, you know, nothing seems to jump out as far as the quarter goes. But just thinking about run rate here, you know, what we saw in the quarter, are you making any investments anywhere? Or what's the best way to think about, you know, costs moving ahead?
Speaker Change: Okay got you that would be helpful. And then I guess just on the expense side of things.
Speaker Change: Things seem to jump out as far as the quarter goes but I'm just thinking about run rate here you know what we saw in the quarter. You know are you, making any investments anywhere or what's the best way to think about cost moving ahead.
Dennis G. Shaffer: So I think we got into 28-4 last time. We came pretty close, and I would think that a good run rate for the rest of the year, the way we bottled it out, is 28-3. So, just about where we've been, maybe a little bit better. But I don't think we've got envisioned any significant investments in any software or hardware or anything else for the balance of this year.
Speaker Change: So I think we guided to.
Speaker Change: 2028, four last time, we came pretty close.
Speaker Change: I would think that a good run rate for the rest of the year. The way we modeled it out is 28 three.
Speaker Change: So just about where we've been maybe a little bit better, but I don't think we've got envied any significant investments in any software or hardware or anything else for the balance of this year.
Justin Frank Crowley: Okay, I appreciate that. And then, just stepping back here for a second, you know, acquisitions have certainly played a role over the years. And you've been pretty clear that M&A will be a part of the growth plan going forward. Curious as we sit here today, you know, after some signs of life across the industry, what's your updated thinking on acquisitions, including what hurdles may still exist, you know, from the Civista standpoint, capital levels, etc., or whatever else you look at?
Speaker Change: Okay I appreciate that and then just stepping back here for a second you know acquisitions have certainly played a role over the years.
Speaker Change: And you've been pretty clear that M&A will be a part of the growth plan going forward curious as we sit here today you know after some signs of life across the industry now what's your updated thinking on acquisitions, including what hurdles may still exist.
Speaker Change: The standpoint capital levels et cetera, or whatever else you look at.
Dennis G. Shaffer: Well, we'll continue to look for opportunities, as we've said, really, since the second half of last year and this first half of this year, we've really been focused on building capital. And so it's been tough to do any type of M&A activities, but I think with the recent movement in stock prices, particularly for publicly traded companies, banks, we've seen a nice lift over the last three or four weeks in our stock price. Banks, privately held banks, banks, basically, under maybe 2 billion in assets, they haven't seen that same lift.
Speaker Change: Well, we'll continue to look for opportunities as we've said really since the.
Speaker Change: Second half of last year and this first half of this year you know, we've really been focused on building.
Speaker Change: The capital up and and you know.
Speaker Change: So you know it's been tough to do any type of M&A activities, but I think with the recent movement in stock prices, particularly.
Speaker Change: Particularly for publicly traded companies.
Speaker Change: You know the banks you know we've seen a nice lift over the last three or four weeks in our stock price base, you know privately held banks space, but basically you know under maybe 2 billion in assets. They haven't seen that same list.
Dennis G. Shaffer: So that's something I think we can point to as we continue to have dialogue with some of our targets and say, look, you know, we're starting to see some lift, and hopefully that continues. But I think that may spur a little bit more conversation anyway. You know, the math up to this point has been very tough to do, but we're going to continue to be opportunistic. And, you know, if we see something that's the right fit for Civista, you know, we'll
Speaker Change: So that's something I think we can point to as we continue to have dialogue with some of our targets and say look you know the.
Speaker Change: We're starting to see sort of lifted.
Speaker Change: We that continues but I think that may spur a little bit more conversations anyways.
Speaker Change: Mass up to this point has been very tough to do.
Speaker Change: But August continue to be opportunistic and if we see something that's the right fit for service.
Speaker Change: You know you know.
We're not going to shy away from that.
Speaker Change: Yeah.
Justin Frank Crowley: Understood. I'll leave it there. Thanks for taking the questions.
Speaker Change: Understood I'll leave it there thanks for taking the questions.
Justin Frank Crowley: You bet Justin.
Operator: Your next question comes from Brendan Nosal with Hubby Group. Your line is now open.
Justin Frank Crowley: Your next question comes from Brendan Nosal with.
Speaker Change: Your line is now open.
Brendan Jeffrey Nosal: Hey, good afternoon, folks. I hope you're doing well. I just want to start off here on the Ohio banking environment, obviously a pretty big deal announced in your neck of the woods on Friday. I know that it's early days following that, but just wondering what the initial playbook is for Civista to potentially capture talent and clients, and then specifically on talent ads, where in the bank you'd most like to take advantage of that dislocation.
Brendan Jeffrey Nosal: Hey, good afternoon folks hope you're doing well.
Speaker Change: However in order to run it.
Brendan Jeffrey Nosal: I just want to start off here just on the Ohio banking environment, obviously, a pretty big deal announced in your neck of the woods on Friday, I know that it's early days.
Speaker Change: Following that but just wondering what the initial playbook is.
Speaker Change: First of all just to potentially capture talent and clients and then specifically on talent ads, where in the banks, even mostly could take advantage of that dislocation.
Dennis G. Shaffer: Yeah, I think obviously disruption is always our friend. So, you know, we do know that Premier had a pretty big presence in Northwest Ohio. And, you know, as you know, we acquired a bank in Northwest Ohio roughly two years ago. So we think that disruption could benefit us in the Northwest Ohio area, in particular. And there may become some talent that could come available there. So that's one area that really jumps out to us is that area right there in Northwest Ohio, because, you know, they have such a strong presence, particularly around the Defiance area and in Bowling Green and Toledo.
Speaker Change: Yeah, I think that will obviously disruption is always our friend.
Speaker Change: So you know.
Speaker Change: We do though that that premier had a pretty good size presence in northwest, Ohio.
Speaker Change: And you know as you know we acquired a page in northwest, Ohio, So roughly two years ago. So we think that disruption could benefit us in our in the northwest, Ohio off area in particular.
Speaker Change: As we and there may be some talent could become available there. So that's one area that really jumps out.
Speaker Change: To US is is that area right there in northwest, Ohio, because you know there.
They have such a strong.
Speaker Change: Presence, particularly around it the finance area.
Speaker Change: And bowling Green in Toledo area. So we think theres still be offered some opportunity there and then there'll be some other opportunities in some of the other markets that we compete in.
Dennis G. Shaffer: So we think there's going to be some opportunity there, and there'll be some other opportunities in some of the other markets that we compete in. But, you know, they didn't have a huge presence in, you know, they were in Youngstown, but, you know, their Cleveland office presence, anyways, branch presence was not super significant in that market. But we do think it'll create some opportunities for us. Yeah, with people and...
Speaker Change: But you know they they didn't have a huge presence in you know they were in Youngstown, but you know their Cleveland office presence Anyways branch presence was.
Speaker Change: It was not super significant in that in that market, but.
Speaker Change: But we do think it will create some opportunities for us there.
Speaker Change: Okay.
Speaker Change: Yeah with people weigh in.
Speaker Change: Customers.
Brendan Jeffrey Nosal: Thanks for the call there. One more for me before I step back.
Speaker Change: Got it got it okay. Thanks for the color there.
Speaker Change: One more from me before I step back just kind of curious what drove the decline in loan and overall, earning asset yields this quarter versus the prior quarter and then I guess you know more broadly on the margin is that filters through.
Speaker Change: Are you expecting to see in the margin in the back half of the year.
Dennis G. Shaffer: Well, we think it starts to stabilize a little bit. I think we're seeing some of that earnings asset decline was somewhat, you know. We put more portfolio residential loans on our balance sheet that we had originated in this second quarter. Put a pretty good number of those on our balance sheet. We did that for a couple of reasons.
Brendan Jeffrey Nosal: Just kind of curious what drove the decline in loan and overall earning asset yields this quarter versus the prior quarter. And then, I guess, more broadly on the margin, as that filters through, what trend are you expecting to see in the margin in the back half of the year? Well, I think it starts
Speaker Change: It starts to stabilize a little bit I think we're seeing some of that.
Speaker Change: The earning asset.
Klein: Klein was somewhat weak.
Speaker Change: We put more portfolio residential loans on our balance sheet.
Speaker Change: We had originated in the second quarter.
Speaker Change: But a pretty good number of those on our balance sheet. We did that for a couple of reasons. One was the anticipated meal if rates bounce down and mortgage rates will also follow suit they balance down if they go down about a half a percent or so we think we're gonna be able to refinance some of those mortgages into fixed.
Dennis G. Shaffer: One, with the anticipated, you know, if rates bounce down, and mortgage rates also follow suit, and they bounce down, if they go down about a half a percent or so, we think we're going to be able to refinance some of those mortgages into fixed-rate saleable products and have a gain on those loans that'll help our income. In addition, most of those loans that we did put on, that we portfolioed, were portfolioed because they're construction loans, they're residential construction loans, and there's not really a saleable product for that.
Speaker Change: Great saleable products and have a gain on those loans that'll that'll help our income. In addition, most of those loans that we did put for all the portfolios where portfolio because of their construction or residential construction loans.
Speaker Change: And there's not really a salable product for that so we have the portfolio and we've been targeting a number of physicians in high net worth borrowers.
Dennis G. Shaffer: So we have to portfolio them, and we've been targeting a number of physicians and high-net-worth borrowers because we think that by doing their mortgage loan, we're gathering their deposit business, their primary deposit. We think we'll flip the loan if rates bounce down off of our balance sheet, but we'll still be able to keep them, and they'll call us their primary bank because we got their primary deposits. So that was some of our thinking behind that.
Speaker Change: Because we think it might go in their mortgage lower gathering their deposit business. There met their primary deposit business. We think we'll flip the loan if rates balanced out off of our balance sheet will still be able to keep they'll call us as their primary bank because we got their primary deposits. So that that was some.
Speaker Change: Our thinking in that.
Dennis G. Shaffer: We're going to try to slow that a little bit, I think, because it does put pressure on some of our, you know, our borrowings and things like that to fund those, and it has impacted the earning asset yield. But we do think as we move forward, the margin will start to stabilize going forward.
Speaker Change: We're gonna try to slow that a little bit I think because it is it does put pressure on some of our you know our our you know our borrowings and things like that but those are and it has impacted the earning asset yield, but we do think as we as we move forward.
Speaker Change: Origin does start to stabilize.
Speaker Change: Going forward.
Speaker Change: Okay very good thank you for taking the questions I appreciate it.
Brendan Jeffrey Nosal: Okay. Very good. Thank you for taking the questions. I appreciate it.
Operator: Your next question comes from Terry McEvoy with Stevens. Your line is now open.
Speaker Change: Your next question comes from Terry Mcevoy with Stephens. Your line is now open.
Terence James McEvoy: Hi, good afternoon, everybody. Hey, Terry. Hi, Terry. Good afternoon.
Terence James McEvoy: Hi, good afternoon everybody.
Speaker Change: Gary.
Terence James McEvoy: I'm wondering if you could talk about what you're seeing in the non-owner occupied CRE portfolio in terms of underlying credit trends. Clearly, there are a lot of concerns across the industry there. And, you know, the company overall just had 10 basis points of charge-off. So really, really not much for us to see externally. This is Chuck, Terry. Knock on wood, asset quality has been pretty strong; we can.
Speaker Change: Jerry I Wonder are you Hey, good afternoon, I'm wondering if you could talk about what you're seeing in the non owner occupied CRE portfolio in terms of underlying credit trends are clearly a lot of concerns across the industry. There and you know the company overall, just had 10 basis points.
Speaker Change: Points of charge offs, so really really not much for us to see externally.
Charles A. Parcher: This is Chuck, Terry. Knock on wood, asset quality has been pretty strong. We continue to dice, slice, and dice that portfolio looking for, you know, anything that would kind of stand out from an interest rate increase or some occupancy stuff. And we've been, you know, I'm not going to say lucky. We've been good, I guess, in that perspective as far as it being very stable. I guess I'll let Mike Mulford comment as well, our Chief Credit Officer. But I am not seeing a whole lot of deterioration.
Charles A. Parcher: This is Chuck Jerry so knock on wood as I call. It has been pretty strong we continue to dice and slice and dice that portfolio looking for you know anything.
Speaker Change: Anything that would kind of stand out from a interest rate increase or some occupancy stuff and we've been you know I don't like I say look it's been good I guess from that perspective as far as it being very stable I guess I'll, let Mike Mulford comment as well, our chief credit officer, but not seeing a whole lot of of deterioration.
Unknown Executive: Yeah. This is Mike Thanks, Chuck no, we've not seen any real significant issues or systemic issues anywhere in any of the portfolios, whether it's geographic or industry type.
Mike: Portfolio still remains.
Charles A. Parcher: And then actually delinquencies bounced down pretty soon, definitely for the quarter, and in credit, they were up a little bit, but they were related to those isolated instances that we really identified late in the fourth quarter and early in the first quarter of this year. So, you know, credit quality is really holding in there nicely.
Mike: Very strong.
Mike: And actually delinquencies bounced down pretty significantly for the quarter and criticized were up a little bit but they were related to those isolated instances that we really identified like you know in the fourth quarter and early in the first quarter of this year. So you know it you know credit quality is really holding in there.
Mike: Yeah.
Mike: Yeah.
Terence James McEvoy: That's great to hear in good color. Thank you. And then just as a follow-up, the other expense line had kind of SBA CDARS and then also additional ATM debit card losses, which I didn't see in the prior press release. So could you shed a little bit of light on, particularly the ATM and debit card losses last quarter?
Speaker Change: That's great to hear and good color. Thank you and then just as a follow up the other expense line had kind of S. P. A seed ours and then also additional ATM debit card losses, which I didn't see in the in the prior press release, so could you shed a little bit of light on a pick of the ATM and debit card losses last quarter.
Ian Wim: Yeah, Terry, this is Ian. Nothing significant or out of the ordinary, just the change in author of how we wrote that out of capturing it, but in terms of the run rate of those ATM losses in life.
Speaker Change: Yes, Terry this is he at nothing significant or as an ordinary I used to change an author of how we broke that out of capturing it but in terms of the run rate of those ATM allows us his life.
Speaker Change: Perfect. Okay, great. Thanks for taking my questions.
Terence James McEvoy: Okay, great. Thanks for taking my questions.
Operator: Your next question comes from Jim Swift. Mr. Switzer with KBW, your line is now open.
Speaker Change: Your next question comes from Jim.
Speaker Change: Sir.
Your line is now open.
Jim Swift: Hey, good afternoon. Thanks for taking my questions. Um, you guys have talked about wanting to build the TCE ratio to about seven, seven and a half percent. Um, do you have a timeline for when you want to achieve this or when you think you will? And like, does it preclude you from doing buybacks at all, or are you kind of balancing the capital level if I evaluate something like that?
Jim: Hey, good afternoon, thanks for taking my questions.
You guys have.
Speaker Change: About wanting to build the TCE ratio to about 775%.
Speaker Change: Do you have a timeline for when you want to achieve this or when you think you will like does it preclude you from doing buybacks at all or are you kind of balancing the capital of the world.
Speaker Change: Eight something like that.
Dennis G. Shaffer: Well, it doesn't preclude us from doing any buybacks, but right now, we're not really... Our earnings have been down some from the previous years, so we're really focused on building capital. We do think our stocks are valuable, but right now, buybacks are not part of that formula right now. We think it's a great way to manage our capital, but right now, we do want to build that. As our margin troughs here, we think our earnings are going to start heading back up in the right direction, and obviously, then that'll help us retain a little bit more of those earnings to help our capital.
Speaker Change: Well it doesn't preclude us from doing any buybacks, but you know right now we're not really you know.
You know our earnings have been you know.
Speaker Change: Down from the previous year. So we know we're really focused on building capital.
Speaker Change: We do think our stocks are valued but we you know right now buybacks are not part of that Formula right. Now we think it's a great way to manage continue to manage our capital, but right now we can do what we do want to build that and you know so you know its earnings you know we think you know as it is our large and.
Speaker Change: Troughs here, we think our learnings we're gonna start heading back up in the right direction. Obviously, then you know that'll help us retain a little bit more of those earnings does it help our capital and then interest rates, if we get some bounce down in interest rates, that's going to correct itself to some degree so I'm trying.
Dennis G. Shaffer: Then, interest rates, if we get some bounce down in interest rates, that's going to correct itself to some degree. I'm anxious to see if they do lower rates in September, what effect that's going to have. We'd like to see it, obviously, sooner than later, but we don't have an exact timetable on that.
Speaker Change: You know anxious to see if they do lower rates in September what effect, that's going to have.
Speaker Change: So.
You know no we'd like to see it obviously sooner than later, but.
Speaker Change: We don't have an exact timetable on that.
Jim Swift: Yeah, okay. And do you guys have any projections or what do your models say of the impact of a Fed rate cut? Initially, you know, is the immediate impact? Did you see some lagging deposit repricing so that maybe there's some downward pressure and then it recovers? Or how are you guys modeling that?
Speaker Change: Yeah, Okay, and do you guys have any projections or what what are your models say of the impact of a fed rate cut.
Speaker Change: Initially you know is the immediate impact did you see some lagging deposit repricing. So that maybe there's some downward and then it recovers or how are you guys modeling that.
Rich Dutton: Right now, Ted, this is Rich. The model really doesn't change much. I mean, 25 bases that break cut in our model is, you know, a basis point at most. There's just not a lot of improvement up or down and then 25 or even 50 bases.
Rich Dutton: Right now Tim this is rich the model it really it doesn't change much in the 25 basis point rate cut in our model as you know on a basis point most of them, they're just not letting that allowed an improvement up or down in that 25, or even 50 basis point movement.
Dennis G. Shaffer: Yeah, Tim, we'd love to see that yield curve become uninverted, I guess, from that perspective. That would help us quite a bit. But if we do get a blip down in the Treasuries, in the longer-end Treasuries, we do feel like we've got a nice refinance opportunity in the mortgage loan area.
Speaker Change: Yeah, So I would love to see that the U.
Speaker Change: Curve become an inverted I guess from from that perspective that would help us quite a bit but if we do get a blip down in the treasuries in the long run Treasury, we do feel like we've got a nice refinance opportunity and then in the mortgage loan area.
Dennis G. Shaffer: Yeah, yeah, that was going to be another follow-up question. Do you think rates would maybe help the loan growth side here?
Speaker Change: Yeah, Yeah that was gonna be another follow up what do you think.
Speaker Change: The rates would maybe help the loan growth side here.
Dennis G. Shaffer: Well, I guess I don't know if it'll help the growth. I mean, to be honest with you, we're kind of hoping that we do see the long end, you know, look down just for at least a short period of time. We'd love to take some of those mortgage loans off the balance sheet, sell them, and get the gain on sale. We'll probably bring our loan balances down a touch. And then, long term, obviously, I mean, we've been holding rates higher than our competition across most of most of our product lines, especially in commercial. If we get a better yield curve slope where, you know, the borrowings make a little bit more sense with the new production, we can increase that a little bit more at any time.
Speaker Change: Well I guess it does.
Speaker Change: I don't know if it'll help the growth I mean to be honest with you. We're we're kind of hoping that we do see the long end you know blip down just for at least for a short period of time, we'd love to take some of those mortgage loans off the balance sheet. So when you get the gain on sale, but programming on our loan balances are down a touch and then long term I always say I mean.
Speaker Change: We've been holding rates higher probably than our competition you know across most of our most of our product lines, especially in commercial you know if we get a better a better yield curve slope, where you know the borrowings made it a little bit more sense with the new production, we can increase that a little bit more names.
Speaker Change: Hi.
Dennis G. Shaffer: So, Tim, just to give you a little color, we have about $700,000, $750,000,000 or so in loans that would be immediately impacted. Those are loans that are tied to prime or SOFR that would adjust downward.
Speaker Change: So just to give you a little color, we have about 700 750 million or so that.
Speaker Change: Loans that would be immediately impacted those are loans that are tied to prime or so for that would adjust downward we have $500 million of borrowings at the end of the third quarter that we would benefit from so you were talking to one or 200 and Oh 15.
Dennis G. Shaffer: We have $500,000,000 of borrowings at the end of the third quarter that we would benefit from. So now you're talking $200,000,000, $250,000,000 of loans, and I think we have broker deposits that will also go down. So when those come soon, those will come, you know, we have about a half a million dollars or half a billion dollars of broker deposits, and those would reprice down, too, just given those few factors.
Speaker Change: Dollars of loans and I think we have broker deposits that will also reprice down.
Speaker Change: So when those come to Xu those will go.
Speaker Change: And we know we have about a half a million dollars a half a billion dollars of brokered deposits and those will reprice down to so as rich said I think it's gonna be fairly neutral.
Just given you know those those few factors.
Jim Swift: Yeah, no, that makes sense. I appreciate those numbers are helpful. Thank you guys.
Speaker Change: Yeah, no that makes sense appreciate that those numbers are helpful. Thank you guys.
Operator: Ladies and gentlemen, as a reminder, should you have a question, press star 1. Your next question comes from Manuel Nava with D.A. Davidson. Your line is now open.
Speaker Change: Ladies and gentlemen, as a reminder, shouldn't you have a question press star one.
Speaker Change: Question comes from Manuel Nava with D. A Davidson your line is now open.
Manuel Antonio Navas: Hey, good afternoon. I just want to clarify on loan growth. You said low single digits. Case from here, or for the whole back half of a year, low single digits from now?
Manuel Antonio Navas: Hey, good afternoon, I just wanted to clarify on loan growth you said low single digits.
Case: Case from here or for the whole back half a year of low single digits from now.
Dennis G. Shaffer: Yeah, for the back half of the year, we're projecting that we're trying to slow that. So some of that growth that we had this quarter was because of those residential construction loans and some of those portfolio loans that we put off. We are now going to try to slow that by bumping those rates, which will probably slow it some. Our commercial rates have been elevated for some time, and we're starting to see a little bit of a slowdown there, but we're being much more selective right now. And, you know, until we can start seeing a little bit more movement with our overnight borrowings and things like that, we want to try to slow loan growth. And, you know, hopefully, start to see some movement in
Case: Yeah.
Speaker Change: For the back half of the year, we're projecting we're trying to slow that so some of that growth that we had this quarter was because of those residential.
Construction loans and some of those portfolio loans, we put on we are not going to try to slow that in my bumping those rates, which which will probably slow that some.
Speaker Change: Our commercial rates have been elevated for some time and we're starting to see a little bit of slow there, but we're being much more selective right now Oh and you know until we can start seeing a little bit more of a movement.
Speaker Change: With our overnight borrowings and things like that we weren't trying to slow low Roes are and you know.
Speaker Change: Hopefully start improving the margin.
Speaker Change:
Manuel Antonio Navas: So that's where I was headed next. Would funding be the wildcard that would allow you to... potentially increase loan growth again? And could I just wait for that?
Speaker Change: So I was gonna, that's where I was headed to next it would with the funding be the wildcard that would allow you to.
Speaker Change:
Speaker Change: Potentially increase loan growth again and can.
Can I just.
Speaker Change: I'll wait for that just is that yeah, absolutely I mean, it's all.
Dennis G. Shaffer: Is that kind of like... Yeah, absolutely. It's all contingent upon the funding, Manuel. And the other thing that we didn't mention in the call, you know, deposits were relatively flat. They were down about $3 million. But there's some noise in there about things that are happening because we are growing some core deposits, but we still had a little tax money this first half of the year. Remember, we exited the program in November.
Speaker Change: Hinges upon the funding ran well and and the other thing that we didn't mention in the call.
Speaker Change: Posits were relatively flat they were down about $3 million was there some noise in there that things that are happening because we are growing some good core deposit.
Speaker Change: Well, we still have a lot of tax money. This first half of the year remember we excellent program in November we still had the tax money on the balance sheet and that is that will that is flowing out so but so that loss. When we say deposits were flat someone asked me he goes we.
Unknown Executive: We still had tax money on the balance sheet, and that is flowing out. So that loss, when we say deposits were flat, some of that's because we lost $50 million of... Unknown Executive, Civista Bancshares Inc., I just want to clarify on deposits. You have those two initiatives that should add $175 million in balances in the third quarter. Have you gotten some of that already? I know you had accounts opened, but how much of that $175 million have you already added to your deposit? At the end of the...
Speaker Change: Lost $50 million of.
Speaker Change: You know tax deposits or so during that time.
Time frame when you still have a little bit more chose to lose so so that's I always talk about this being a transition year and part of it is is it because there's some there's some noise in some of these categories.
Speaker Change: Okay I just wanted to clarify on the deposits you have those two initiatives that should add 175 million of balance sheets in the third quarter have you gotten some of that already I know you had accounts open up.
Speaker Change: How much balance of about 175 have you already added to your to your deposit base at the end of the second quarter was 44 million.
Unknown Executive: At the end of the second quarter, it was $44 million.
Speaker Change: Or so.
Manuel Antonio Navas: And is 175 still the rough target?
And is that 175 still the rough target.
Dennis G. Shaffer: And on those two initiatives, we also have several other initiatives that are just kicking off that, you know, we think will bring in some other deposits. We hope to share some of that with you in the third quarter, with our third-quarter results, because some of them have kicked off, and we're gaining some traction on those.
Speaker Change: And on those two initiatives. We also have several other initiatives that are just kicking it all off of that you know we think we will bring some other deposits.
Speaker Change: Deposits in we hope to share some of that with you in the third quarter.
Speaker Change: With our third quarter results because some of them have kicked off and we're gaining some traction in those.
Manuel Antonio Navas: Could that get you to the point where you have a better name and could potentially have a little bit increased loan growth into 2025 from current levels? Sure.
Speaker Change: Could could that get you to the point where.
Speaker Change: Do you have a better NIM and could potentially have.
Speaker Change: A little bit increased loan growth into 2025 from current levels.
Dennis G. Shaffer: Sure, sure, and it's not only getting those deposits in; we're exploring other things. We get a bounce back in rates. And there's probably, you know, there could be loans that we refinance off that also help that funding. You know, it's just a couple; there are several other initiatives that we're exploring in that regard. So it's not just deposit gathering; it's also things that we can do on the loans on the, you know, on the, with some of our other assets.
Speaker Change: Sure sure and then and it's not only getting those deposits in some where we're exploring other where we're exploring other things we get a bounce down in rates.
Speaker Change: And there's probably you know there could be there could be loans that we refinance off that's all so I hope that that funding.
Speaker Change: It's a composite of several other initiatives that we're exploring in that regard. So it's not just deposit gathering. It's also things that we can do on the on the lows.
Speaker Change: You know that with some of our other assets.
Mike: And then Mike.
Dennis G. Shaffer: I was just going to add, you know, what we're really doing is balancing to make sure that we make an appropriate return on the liquidity and the capital that we're investing out there to make sure that we get the appropriate return. So it's easy to get some deposits that are really high priced.
Mike: Oh, Yeah, I can add.
Mike: What we're really doing is balancing to make sure that we.
Mike: We make an appropriate return on that until the liquidity and the capital that we're investing out there to make sure that we got to get appropriate return. So it's easier to go get some deposits that are really high priced we just think that would make our parks and suffer.
Dennis G. Shaffer: We just think that would make our margins suffer. Do you feel that you've hit like... We did lower deposit costs in the second quarter. We think we have room to decrease and lower those costs as we move forward. That's great. And just shifting gears for a second.
Mike:
Speaker Change #100: Do you feel that you've hit like.
Speaker Change: Peak deposit costs start to come back down linked quarter or could that fluctuate from here.
Speaker Change: So we think with them that has peaked.
Speaker Change #101: And you know, we did lower deposit costs in the second quarter.
Speaker Change #101: We think we can do we have room to the decrease in lower those costs here in the third you know as we move forward.
Speaker Change #107: That's great and then.
Speaker Change #102: And just shifting gears for a second.
Manuel Antonio Navas: I would love that leasing residual number when you guys get it. That would be helpful on the fee side, um, I think, actually. What was the loan yield on residential real estate added this quarter? I think he went through some of the commercial yields being really high like 8% plus. I'm sure the resi is a little bit lower. I understand that it's a lower yielding asset, but I might have missed it. I believe it was 660 or 665. I'm looking for that number right now.
Speaker Change #104: I I would love to that leasing residual number when you guys get it that would be helpful on the fee side.
Speaker Change #103: Got it.
Speaker Change #103:
Okay.
Speaker Change #105: I think accident.
Speaker Change #106: Uh huh.
Speaker Change #109: What was the loan yields on the resi real estate added this quarter I think you went through some of the commercial yields being really high like 8% plus I'm sure. He's a little bit lower I understand that it's a lower yielding asset okay I might have missed it because I believe it was 666 65.
Speaker Change #109: Looking for that number right now.
Speaker Change #106: Okay.
Unknown Executive: Year to date 24663
Speaker Change #108: Year to date 24 63.
Manuel Antonio Navas: Okay, thank you. Thank you. I'll step back into the queue. I really appreciate the commentary.
Speaker Change #110: Okay. Thank you. Thank you I'll step back into the queue I really appreciate the commentary.
Speaker Change #108: Yep.
Operator: There are no further questions at this time. I will now turn the call over to Dennis Shaffer for closing remarks.
Speaker Change #108: There are no further questions at this time I will now turn the call over to Dennis Shaffer for closing remarks.
Dennis G. Shaffer: Well, in closing, I just want to thank everyone for joining and those that participated on today's call. Again, this quarter's results were due in large part to the hard work and the discipline of our team. We will continue to focus on growing Civista and growing it the right way. Again, this is a transition year for us, but I believe our focus on improving our strong core deposit franchise and our disciplined approach that we take to pricing loans and deposits and managing the company positions us well for future success. So I look forward to talking to you all again in a few months to share our third quarter results. Thank you for your time today.
Dennis G. Shaffer: Well in closing I, just want to thank everyone for joining and those that participated on todays call again. This quarter's results were due in large parts of the hard work and the discipline of our team.
Dennis G. Shaffer: We will continue to focus on growing service and growing it the right way.
Dennis G. Shaffer: Again, this is a transition year for us but.
Dennis G. Shaffer: But I believe our focus on improving our strong core deposit franchise and our disciplined approach, we take to pricing loans and deposits and are managing the company.
Dennis G. Shaffer: It does position us well for future success. So I look forward to talking to you all again in a few months to share our third quarter results. Thank you for your time today.
Dennis G. Shaffer: Yeah.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Speaker Change #112: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating in assay. Please disconnect your lines.
Dennis G. Shaffer: Yes.
Dennis G. Shaffer: Yes.
Dennis G. Shaffer: [music].
Dennis G. Shaffer: Yeah.
Dennis G. Shaffer: Yeah.
Dennis G. Shaffer: Yeah.
Dennis G. Shaffer: Yes.
Dennis G. Shaffer: [music].