Mike Price: Well, the first thing order of business is announcing closing and converting a bank are the easy part. The hard part is having a ground game and growing a great franchise and a footprint that we just acquired. And we’re working hard on that every month. We had actually modeled just because of our history with M&A a little downdraft initially with deposits and loans and we put that into our deal math. And — but we need — we want to hit the ground running in the second half of the year and certainly well into 2024, but those are great markets. It’s a great opportunity. Those branches we think we can they can become a terrific depository for us. We’re off to a good start. And those are markets that have a little stronger demographics than we’re used to in Western Pennsylvania more like Ohio.
In terms of our preference for growth, just stating a fact, Ohio has been very good to us. We’ve had double-digit growth there on the loans and deposits side now for five or six years. Our little $180 million bank in Cincinnati is now over $700 million in assets. Columbus and Northern Ohio are now $1.2 billion and $1.3 billion respectively. They can fill in with the depository and get a better loan-to-deposit ratio like we have in Pennsylvania, but there’s a lot of upside there. And we like those markets and they’ve been good to us. Pennsylvania is our home state and we have $3.4 billion in Community Pennsylvania in deposits. That’s kind of the bread basket of the company. To the extent that we could do things in market or contiguous to that and Jim and I use about — and Jane about rural depositories all the time we love them.
And so there’s all kinds of opportunities that they tend to be kind of episodic in terms of how they present themselves. But we’re trying to — there’s a lot of good banks out there that we can partner with. And in terms of size I think our history is probably fairly indicative of what might be our future. We’ve done really small deals, $200 million and up to — Centric was the largest at $1.1 billion and — but very manageable. And that way if you get sideways for a few months you can figure it out and press forward. And we expect deals to not only be accretive to earnings, but really accretive to profitability long-term. And that’s a little higher standard. And the things we’ve done in Ohio have done exactly that for us. We were a 60-plus efficiency bank.
We were an ROA that couldn’t get to one. And that’s all changed in the last five years or six years with some good acquisitions. And then quite frankly most of that is organic. But that’s probably more color than you bargained for, but it’s — I wish it was you could almost bake it into your plan, but you and I both know you can’t. At least if you’re selective you can’t…
Matthew Breese: No, I understand and I appreciate all the color. Thank you. That’s all I had.
Operator: And we’ll take our next question from Manuel Navas with D.A. Davidson. Your line is open.
Manuel Navas: Hi. Good afternoon.
Mike Price: Good afternoon, Manuel.
Manuel Navas: Just thinking about the loan portfolio and the mid single-digit loan growth guide, can you kind of go into a little more detail on the mix of it going forward? I know you talked a little bit about consumer pulling back a little bit, but just a little more color on the mix. And it’s going to be first half weighted or not? Any kind of thoughts on that end as well?
Mike Price: Yes. When you look back the last several years the first quarter at least for us has always been light and we’ve tended to do better in the second half of the year. I don’t know if that’s a trend, but it certainly has been the case for the last two or three years. As I look at kind of on page 7 our — actually it’s not page 7, sorry about that. I think it’s page 4 — page 6. I think we have an opportunity to grow C&I. Construction has been good to us that can present some opportunities. Commercial real estate we’ve picked up a lot of commercial real estate with Centric. We’d like to grow the C&I the small business and I think this where we would start. And — but we have good mortgage commercial real estate and other portfolios that just are a little harder in a higher rate environment.
And indirect auto as I mentioned where you really need to get the right pricing and the right deal. And so I think it will come on the C&I side and maybe a little bit on the branch side the branch consumer lending side. Certainly on Equipment Finance that business is ramping up a little slower than we expected, but nonetheless it will be meaningful this year. I think we’re looking at over $200 million there alone. So that will help the C&I side. Is this helpful? I don’t mean to ramble.
Manuel Navas: Right. I was going to ask about Equipment Finance specifically. So that was kind of helpful with that target.
Mike Price: Jim anything or Jane you’re on the line. Anything I missed? Jane?
Jane Grebenc: No. I think that we’re really targeting. As you said Mike, C&I and we will get a fair share of commercial real estate. And that’s why you have lots of businesses because when some are down the others can carry the water.
Manuel Navas: Okay. Can I flip that to kind of deposit side just kind of thoughts on where the non-interest-bearing percentage can stay stable or where it can fall to? And a lot of your new growth is CDE. I’m just wondering how high that book can get just as you kind of play out across the year and grow deposits?
Mike Price: Yes. Jim, why don’t — you’ve modeled it. So…
Jim Reske: Yes. So the NIV the total deposits was 33% last quarter fell to 29% this quarter. It was 25% pre-pandemic. So it probably settles somewhere in the mid- to high 20s.
Manuel Navas: And then the CD book was so low before like just two quarters ago, where could that get to? I mean you just have capacity there. Just kind of thoughts on more normalized CD book.
Jim Reske: It’s a fair question, but I don’t have an answer for it. I don’t know as a percentage of total deposits. We’re definitely rebuilding it. We had let it go to zero. We had really during the pandemic focused on trying to get our total cost of deposits as close to zero as possible.
Manuel Navas: Yeah.
Jim Reske: And so with a conscious idea to not pursue time deposits and we are doing that. I would say one thing that’s really encouraging is a little anecdote that might be helpful to you. As we put out time deposits now we find that a lot of the customers that we have are very loyal to us and have taken money — pick up their operating accounts with us, but idle cash balances that because we’re offering sectional rates they took them somewhere else and now they’re bringing them back. So we have found is that when we put out a time deposit special and we track dollars. For every $100 million we attract just say about $50 million of that will be our own money. That’s customers that kept it in a non-interest-bearing account or a savings account may take advantage of a CD special.
But about $25 million will be money from our own customers that they kept somewhere else some other bank. They bring back to us. And then the last $25 million is new money coming from outside the bank.
Manuel Navas: Yeah.
Jim Reske: So hopefully that gives you a little color on how things are moving. But we do have…
Mike Price: And we had the luxury of doing that simply because, Jane and the team, our business bankers, our commercial bankers, our branch managers I mean their primary charge is to go out and get a non-interest-bearing deposit account and a core depository from a small business. And not all branch employees and banks run their retail model that way. But Jane and the team do and that really put us in a strong position where really over half of our depository was non-interest-bearing and now accounts are low-interest checking. And so I think it will be natural that perhaps we can grow because our customers are loyal. We just didn’t give them a really attractive CD option. Jane, anything you want to add? This is your baby.
Jane Grebenc: No, I don’t think so Mike. I think you’ve covered it.
Jim Reske: Let me just add one bit that might also be helpful with you in terms of deposit flows within the bank. We gave a number for the amount of non-interest bearing that — decline in non-interest-bearing over the course of the quarter. On the average it was $180 million and change. And — but money market went up other deposit categories went up CD definitely went up. Yeah, here’s just one dynamic for you. We have offered the ICS product for a long time. That’s the product we all know about now, that allows customers to break up their deposits and receive virtually unlimited deposit insurance. It’s a product we’ve had for years. And now there’s much more awareness of it. And so customers are taking advantage of it. There’s a cost to it.
There always has been. And so the different environment customers were willing to pay that cost. And things have changed. So we saw — while we saw non-interest-bearing deposits go down. We saw the ICS balances go up from about $100 million to $200 million over the course of the quarter. So that’s a lot of non-interest-bearing money that just becomes now account basically within their interest, but stays at the bank. So we’re happy to offer that and our customers really appreciate it.
Manuel Navas: That’s great color. Can I shift with one last question? You have your fund outlook — your Fed funds outlook that has a little bit of a lower end point for the year. Kind of how is — how are you positioned for a potential rate decline to some point?
