Civista Bancshares Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 29, 2024

There are 9 speakers on the call.

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 Savista Bancshares Inc. That involves risks and uncertainties. Various factors could cause actual results to be materially different from any future results or expressed 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.

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. This call will be recorded and made available on Savista Bancshares' website at www.civb.com. At the conclusion of Mr. Schafer's remarks, he and the Savista management will take any questions you may have.

Operator

Now I will turn the call over to Mr. Schaeffer.

Speaker 1

Good afternoon. This is Dennis Schaeffer, President and CEO of Savista Bancshares Inc. I would like to thank you for joining us for our Q2 2024 earnings call. I'm joined today by Rich Dutton, SVP of the company and Chief Operating Officer of the bank Chuck Percher, SVP of the company and Chief Lending Officer of the bank Ian Wynne, SVP of the company and Chief Financial Officer of the bank and other members of our executive team. This morning, we reported net income for the Q2 of $7,100,000 or $0.45 per diluted share, which represents a $700,000 or 10% increase over the Q1 of 2024 and a $3,000,000 decline from our Q2 in 2023.

Speaker 1

Overall, I was pleased with our quarterly results. As I mentioned during our Q1 call, this is a year of transition for Savista as we look to replace the revenue and non interest bearing funding from the exited relationship with our income tax refund processor. 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. 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 1

This all takes time, but these initiatives will help reduce our dependency on higher interest funding sources and overall funding costs. 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 4 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. We continue to have strong loan demand across our footprint.

Speaker 1

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. 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 percent 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 Q1 of 2024 coming in at 3.09% for the quarter.

Speaker 1

For the quarter, we also experienced an increase in our allowance for credit losses, which was primarily attributable to the strong loan growth. There was a $500,000 charge off associated with a discrete fraud related event that one of our clients experienced. Earlier, we also announced a quarterly dividend of 0.16 $6 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 2nd quarter. During the quarter, non interest income increased $2,000,000 or 24% from the Q1 and $1,300,000 or 15% from the Q2 of 2023.

Speaker 1

The primary drivers of the increase from our linked quarter were $1,700,000 in fees related to leasing operations at Savista Leasing and Finance, partially offset by declines in service charges due to changes made last year in how we process overdrafts. The primary drivers for the increase from the prior year's 2nd quarter were $1,300,000 in fees related to leasing operations along with increased wealth management fees. Our increases overcame the $475,000 in lost income related to the tax refund processing fees. Non interest expense for the quarter was $28,600,000 and represents an $866,000 or 3.1% increase over the Q1. This increase is primarily attributable to increases in compensation related to annual merit increases, which take into effect in April each year.

Speaker 1

The decrease in equipment expense is primarily due to the reduction of depreciation related to operating leases as they mature. Compared to the prior year's Q1, 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 1

Turning our focus to the balance sheet. For the quarter, COGOL loans and leases grew by $116,900,000 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. The loans we are originating for our portfolio continue to be virtually all adjustable rate and our leases all have maturities of 5 years or less. During the quarter, new and renewed commercial loans were originated at an average rate of 8.20%.

Speaker 1

Residential real estate loans were originated at 6.64% and loans and leases originated by our leasing division were at an average rate of 9.75%. Loans secured by office buildings make up 5.1% of our total rather they are predominantly rather they are predominantly secured by single or 2 story offices located outside of central business districts. Along with year to date loan production, our pipelines are fairly strong and our undrawn construction lines were $273,000,000 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 $3,000,000 for the quarter.

Speaker 1

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 for 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. As part of the program, the state will deposit up to $100,000,000 in low cost funds at a current rate of 86 basis points into participating bags. 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 an initiative is that we have historically maintained the cash balances of our wealth management clients and other financial institutions.

Speaker 1

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. Based on the current cash positions, we anticipate being able to move $75,000,000 of those funds into the bank by the end of the 3rd 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, our cost of interest bearing deposits decreased by 5 basis points to 2.75% during the quarter.

Speaker 1

Our deposit base continues to be fairly granular with our average deposit accounts 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. With respect to FDIC insured deposits, excluding Savista's own deposit accounts and those related to the tax program, 11.8% or $352,000,000 of our deposits were in excess of the FDIC limits at quarter end. Our cash and unpledged securities at June 30 were $456,800,000 which more than covered these uninsured deposits. Other than $404,600,000 of public funds with various municipalities across our footprint, we had no deposit concentrations at June 30.

Speaker 1

At the end of the quarter, our loan to deposit ratio remained elevated. Our commercial lenders, our 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. We believe our low cost deposit franchise is one of Savista'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 1

At June 30, all of our securities were classified as available for sale and had $63,200,000 of unrealized losses associated with them. This represented an increase in unrealized losses of $8,600,000 since December 31, 2023 and is consistent with our linked quarter. At June 30, our security portfolio was $612,000,000 which represented 15% of our balance sheet and when combined with cash balances is 22.5% of our deposit. 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.

Speaker 1

So this is 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 value. While our capital levels remain 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 7% and 7.5%. To that end, we will continue to focus on earnings and we'll balance any repurchases and the payment of dividends with building capital to support growth.

Speaker 1

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. As I previously mentioned, we did make a $1,700,000 provision during the quarter, which was primarily attributable to funding loan growth and a charge off associated with a discrete fraud event related to a commercial borrower that suffered internal fraud. Our ratio of our allowance for credit losses to total loans is 1.32% at June 30, up 2 basis points from 1.30 percent at December 31, 2023. This change is due to the loan mix of new production and the quarterly updating of factors within our model. In addition, our allowance for credit losses to non performing loans is 2 25% at June 30, 2024 compared to 2 47% at March 31, 2024 and 246% at December 31, 2023.

Speaker 1

Dollars 1,500,000 of the increase in non performing loans was attributable to the previously mentioned fraud related event of 1 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 take are taking to generate more lower cost funding are beginning to generate results. 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, Savista continues to generate solid earnings and our focus continues to be on creating shareholder value and serving our customers and communities.

Speaker 1

Thank you for your attention this afternoon and your investment. And now we will be happy to address any questions that you may have.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Justin Crowley with Piper Sandler. Your line is now open.

Speaker 2

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.

Speaker 2

If there's anything about pull forward in revenues or how you're thinking about that business going forward here?

Speaker 1

Can you repeat the question again, Justin?

Speaker 2

Yes. It was just on the leasing business, just given the strong result for the quarter. I'm just curious if any of that revenue was pulled forward from later in the year, or what the best way to think about run rate there is?

Speaker 1

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 right now I think it's hard to predict that revenue as it can be inconsistent and from quarter to quarter, usually the second half of the year is a little bit stronger. But we're really happy with the sublist of leasing or sublist of leasing and finance group.

Speaker 3

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 is 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's a gain.

Speaker 3

We don't see many losses there. But that I've talked to lots of other bankers that own leasing companies and that's just I don't know how you project or forecast that piece of the revenue.

Speaker 2

Okay. But in terms of like maybe a reasonable expectation for the back half of the year, in light or in spite of back half usually being seasonally stronger, would it seem that 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 perhaps fees close let's say $9,000,000

Speaker 1

Yes. If you took out

Speaker 3

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 it for you.

Speaker 4

Okay, got you.

Speaker 2

That would be helpful. And then I guess just on the expense side of things, nothing seems to jump out as far as the quarter goes. But just thinking about run rate here, what we saw in the quarter, are you making any investments anywhere? Or what's the best way to think about costs moving ahead?

Speaker 3

I think we guided to 28.4% last time. We came pretty close. And I would think that a good

Speaker 1

run rate for the rest of the year,

Speaker 3

the way we model it out is a 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 2

Okay. I appreciate that. And then just stepping back here for a second, acquisitions have certainly played a role over the years, and you've been pretty clear that M and A will be a part of the growth plan going forward. Curious as we sit here today after some signs of life across the industry, what's your updated thinking on acquisitions, including what hurdles may still exist from the Savista standpoint, capital levels, etcetera or whatever else you look at?

Speaker 1

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 up and so it's been tough to do any type of M and A activities. But I think with the recent movement in stock prices, particularly for publicly traded companies, the banks, we've seen a nice lift over the last 3 or 4 weeks in our stock price. Banks, privately held banks, banks basically under maybe $2,000,000,000 in assets, they haven't seen that same lift. So that's something I think we can point to as we continue to have dialogue with some of our targets and say, look, we're starting to see some lift and hopefully that continues. But I think that may spur a little bit more conversations anyways.

Speaker 1

The math up to this point has been very tough to do. But we're going to continue to be opportunistic. And if we see something that's the right fit for Savista, we're not going to shy away from that.

Speaker 2

Understood. I'll leave it there. Thanks for taking the questions.

Speaker 3

You bet, Justin.

Operator

Your next question comes from Brendan Nozzle with Hovde Group. Your line is now open.

Speaker 5

Hey, good afternoon folks. Hope you're doing well. Hey, Brendon. Hey, Brendon.

Speaker 6

Just want to

Speaker 5

start off here just on the Ohio banking environment. Obviously, a pretty big deal announced in your deck of the woods on Friday. I know that it's early days following that, but just wondering what the initial playbook is for Savista 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?

Speaker 1

Yes, I think that obviously disruption is always our friend. So we do know that Premier had a pretty good size presence in Northwest Ohio. And as you know, we acquired a bank in Northwest Ohio roughly 2 years ago. So we think that disruption could benefit us in the Northwest Ohio area in particular as we and there may become some talent could come available there. So that's one area that really jumps out to us is that area right there in Northwest Ohio because they have such a strong presence, particularly around the Defiance area and Bowling Green and Toledo area.

Speaker 1

So we think there's still be some opportunity there. And there'll be some other opportunities in some of the other markets that we compete in. But they didn't have a huge presence in they were in Youngstown, but their Cleveland office presence anyways, branch presence was not super significant in that market. But we do think it will create some opportunities for us there, yes, with people and customers.

Speaker 5

Got it. Okay. Thanks for the color there. One more for 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?

Speaker 5

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? Thanks.

Speaker 1

Well, we think it starts to stabilize a little bit. I think we're seeing some of that. The earning asset decline was somewhat we put more portfolio residential loans on our balance sheet that we had originated in the Q2, put a pretty good number of those on our balance sheet. We did that for a couple of reasons. 1, with the anticipated rates bounce down and mortgage rates also follow suit and they bounce down.

Speaker 1

If they go down about 0.5 percent or so, we think we're going to be able to refinance some of those mortgages into fixed rate salable products and have a gain on those loans that will help our income. In addition, most of those loans that we did put on what we portfolioed were portfolioed because they're construction, they're residential construction loans. And there's not really a saleable product for that. So we have the portfolio and we've been targeting a number of physicians and high net worth borrowers, because we think by going their mortgage loan, we're gathering their deposit business, their primary deposit business. We think we'll flip the loan if rates balance down off of our balance sheet and we'll still be able to keep don't call us their primary bank because we got their primary deposits.

Speaker 1

So that was some of our thinking in that. We're going to try to slow that a little bit, I think, because it does put pressure on some of 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 does start to stabilize going forward.

Speaker 5

Okay, very good. Thank you for taking the questions. Appreciate it.

Operator

Your next question comes from Terry McEvoy with Stephens. Your line is now open.

Speaker 7

Hi, good afternoon, everybody.

Speaker 6

Hey, Terry.

Speaker 7

Hi, Terry. I wonder

Speaker 6

if you could

Speaker 7

talk about what you're seeing in the non owner occupied CRE portfolio in terms of underlying credit trends. Clearly, a lot of concerns across the industry there and the company overall just had 10 basis points of charge offs. So really, really not much for us to see externally.

Speaker 8

This is Chuck, Terry. Knock on wood, asset quality has been pretty strong. We continue to dice place and dice that portfolio looking for anything that would kind of stand out from an interest rate increase or some occupancy stuff. And we've been I'm not going to say, look, it has been good,

Speaker 1

I guess, from that perspective as

Speaker 8

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 deterioration.

Speaker 1

Yes, this is Mike. Thanks, Chuck. No, we've not seen any real significant issues, systemic issues anywhere in any of the portfolios whether geographic or industry type portfolio still remains very strong. Yes. And then actually delinquencies bounced down pretty significantly for the quarter.

Speaker 1

And in criticized, we're up a little bit, but they were related to those isolated instances that we really identified late in Q4 early in Q1 of this year. Credit quality is really holding in there nicely.

Speaker 7

That's great to hear and good color. Thank you. And I just have a follow-up. The other expense line had kind of SBA, SEDARs 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 6

Yes, Terry, this is Ian. Nothing significant or out of the ordinary by 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 7

All right. Okay. Great. Thanks for taking my questions.

Operator

Your next question comes from Jim Switzer with KBW. Your line is now open.

Speaker 4

Hey, good afternoon. Thanks for taking my questions. You guys have talked about wanting to build the TCE ratio to about 7%, 7.5%.

Speaker 1

Do you have

Speaker 4

a timeline for when you want to achieve this or when you think you will? And does it preclude you from doing buybacks at all? Or are you kind of balancing the capital level where it was off with like an evaluate something like that?

Speaker 1

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 valued, 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.

Speaker 1

And so as earnings we think as our margin troughs here, we think our earnings are going to start heading back up in the right direction. Obviously, then that will help us retain a little bit more of those earnings to 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 kind of anxious to see if they do lower rates in September, what effect that's going to have. So, no, we'd like to see it obviously sooner than later, but we don't have an exact timetable on that.

Speaker 4

Yes. Okay. And do you guys have any projections or what do your models say of the impact of a Fed rate cut initially? 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?

Speaker 3

Right now, Tim, this is Rich. The model really it doesn't change much. I mean 25 basis rate cut in our model is a basis point at most. I mean, there's just not a lot of improvement up or down and then 25 or even 50 basis point movement.

Speaker 8

Yes. So 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 and the longer end treasury, we do feel like we've got a nice refinance opportunity

Speaker 6

in the mortgage loan area.

Speaker 4

Yes. That was going to be another follow-up. Do you think rates would maybe help the loan growth side here?

Speaker 8

Well, I guess I don't know if it will help the growth. I mean, to be honest with you, we're kind of hoping that we do see the long end look 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, sell 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 probably than our competition across most of our product lines, especially in commercial.

Speaker 8

If we get a better yield curve slope where the borrowings make a little bit more sense with the new production, we can increase that a little bit more at any time.

Speaker 1

So Tim, just to give you a little color, we have about $700,000,000 $750,000,000 or so that loans that would be immediately impacted. Those are loans that are tied to prime or so for that would adjust downward. We have $500,000,000 of borrowings at the end of the 3rd 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 reprice down.

Speaker 1

So when those come soon, those will come and we have about $500,000 or $500,000 of broker deposits and those would reprice down too. So as Rich said, I think it's going to be fairly neutral just given those few factors.

Speaker 4

Yes. That makes sense. Appreciate those numbers are helpful. Thank you, guys.

Operator

Your next question comes from Manuel Nava with D. A. Davidson. Your line is now open.

Speaker 6

Hey, good afternoon. I just want to clarify on loan growth. You said low single digits pace from here or for the whole back half of the year low single digits from now?

Speaker 1

Yes. 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 that we put on. We are now going to try to slow that and by bumping those rates, which will probably slow that some. 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.

Speaker 1

And 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 hopefully start improving the margin.

Speaker 6

So I was going to that's where I was headed to next. Would the funding be the wildcard that would allow you to potentially increase loan growth again? And can I just I'll wait for that? Just is that kind of

Speaker 1

like Yes, absolutely. It's all contingent upon the funding, Manuel. And the other thing that we didn't mention in the call, deposits were relatively flat. They were now about $3,000,000 But there's some noise in there that things that are happening because we are growing some core deposits, but we still had a little tax money in this first half of the year. Remember, we exited the program in November.

Speaker 1

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 $50,000,000 of tax deposits or so during that timeframe. And we still have a little bit more chunk to lose. So that I always talk about this being a transition year. Part of it is because there's some noise in some of these categories.

Speaker 6

I just want to clarify on the deposits. You have those 2 initiatives that should add $175,000,000 in balances in the Q3. Have you gotten some of that already? I know you had accounts open up, but how much balances of that $175,000,000 have you already added to your deposit base?

Speaker 1

At the end of the Q2, it was $44,000,000

Speaker 6

or so. Okay. With and is that $175,000,000 still the rough target?

Speaker 1

On those two initiatives, we also have several other initiatives that are just kicking off that we think will bring some other deposits and we hope to share some of that with you in the 3rd quarter with our Q3 results because some of them have kicked off and we're gaining some traction in those.

Speaker 6

Could that get you to the point where you have a better NIM and could potentially have a little bit increased loan growth into 2025 from current levels?

Speaker 1

Sure, sure. And it's not only getting those deposits in, so we're Sure, sure. And it's not only getting those deposits in, so we're exploring other things. We get a bounce down in rates and there's probably there could be loans that we refinance off that also help that funding. It's just some other initiatives that we're exploring in that regard.

Speaker 1

So it's not just deposit gathering. It's also things that we can do on the loans with some of our other assets.

Speaker 6

And then I was going to add. What we're really doing is balancing to make sure that we make an appropriate return 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 go get some deposits that are really high priced. We just think that would make our margins suffer. Do you feel that you've hit like peak deposit costs now that you've started to come back down linked quarter or could that fluctuate from here just based on

Speaker 1

No, we think that is peaked and we did lower deposit costs in the second quarter. We think we can we have room to decrease and lower those costs here in the 3rd as we move forward.

Speaker 6

That's great. And just shifting gears for a second, I would love for that leasing residual number when you guys get it, that would be helpful on the fee side. And then I think actually what was the loan yields on 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 resi is a little bit lower.

Speaker 6

I understand that it's a lower yielding asset, but I might have missed it.

Speaker 1

60, I believe it was. 660 or665, looking for that number right now. Year to date 20 foursix sixty three.

Speaker 6

Okay. Thank you. Thank you. I'll step back into the queue. I really appreciate the commentary.

Speaker 6

There are

Operator

no further questions at this time. I will now turn the call over to Dennis Shafer for closing remarks.

Speaker 1

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 Savista and growing it the right way. Again, this is a transition year for us and I believe our focus on improving our strong core deposit franchise and our disciplined approach that we take to pricing loans and deposits and the managing company does position us well for future success. So I look forward to talking to you all again in a few months to share our Q3 results.

Speaker 1

Thank you for your time today.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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Key Takeaways

  • The company’s net interest margin contracted by 13 basis points to 3.09% in Q2, pressured by higher overnight borrowings and broker deposits despite disciplined deposit pricing that reduced deposit costs by 4 basis points.
  • Organic loan and lease balances grew at an annualized 16% rate, driven by non-owner occupied commercial real estate, residential real estate, and construction loans, reflecting continued strong market demand.
  • Noninterest income rose 24% from Q1 and 15% from Q2 2023, led by leasing operation fees and increased wealth management revenue, helping to offset lost tax refund processing fees.
  • The bank launched deposit initiatives such as the Ohio Home Buyers Plus program and repatriating wealth management cash to secure up to $175 million of low-cost funding by Q3, aiming to reduce reliance on higher-cost wholesale deposits.
  • Capital ratios remain strong with a Tier 1 leverage ratio of 8.59% and tangible common equity at 6.18% (below the 7–7.5% target), while maintaining a $0.16 quarterly dividend (3.37% yield) and prioritizing capital build over buybacks.
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Earnings Conference Call
Civista Bancshares Q2 2024
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