CVB Financial Corp. (CVBF) Q2 2018 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. And welcome to the Second Quarter 2018 CVB Financial Corporation and its subsidiary, Citizens Business Bank Earnings Conference Call. My name is Jamie and I’m your operator for today. At this time, all participants are in a listen-only mode. [Operator Instructions] Please also note this event is being recorded. At this time, I would now like to turn the presentation over to your host for today’s call, Christina Carrabino. Ma'am, you may proceed.

Thank you, Jamie, and good morning everyone. Thank you for joining us today to review our financial results for the second quarter of 2018. Joining me this morning are Chris Myers, President and Chief Executive Officer, and Allen Nicholson, Executive Vice President and Chief Financial Officer. Our comments today will refer to the financial information that was included in the earnings announcement released yesterday. To obtain a copy, please visit our website at www.cbbank.com and click on the Investors tab. Before we get started, let me remind you that today’s conference call will include some forward-looking statements. These forward-looking statements relate to, among other things, current plans, expectations, events and industry trends that may affect the Company’s future operating results and financial position. Such statements involve risks and uncertainties, and future activities and results may differ materially from these expectations. The speakers on this call claim the protection of the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995. For a more complete discussion of the risks and uncertainties that may cause actual results to differ materially from our forward-looking statements, please see the Company’s annual report on Form 10-K for the year ended December 31, 2017, and in particular, the information set forth in Item 1A Risk Factors, therein. Now, I will turn the call over to Chris Myers.

Thank you, Christina. Good morning, everyone and thank you for joining us again this quarter. Yesterday, we reported net earnings of $35.4 million for the second quarter compared with $34.9 million for the first quarter of 2018, and $28.4 million for the year ago quarter. A second quarter earnings with highest quarterly earnings in CVB's history as were our year-to-date earnings of $70.3 million. Earnings per share were $0.32 for the second quarter compared with $0.32 for the first quarter and $0.26 for the year ago quarter. The second quarter represented our 165th consecutive quarter of profitability, and 115th consecutive quarter of paying cash dividend to our shareholders. In February, we announced that we had entered in to merger agreement with Community Bank pursuant to which Community Bank will merger into Citizens Business Bank. The shareholders of both companies approved the merger on June 21st. Through the first six months of 2018, we earned $70.3 million compared with $56.9 million for the six months of 2017. Diluted earnings per share was $0.64 for the six months period ended June 30, 2018, compared with $0.52 for the same period in 2017. Our tax equivalent net interest margin was 3.82% for the second quarter, compared with 3.68% for the first quarter of 2018 and 3.63% for the second quarter a year ago. Total loans increased slightly by $22 million or 0.46 % to $4.82 billion for the second quarter of 2018. Commercial real estate loans increased by $36 million for the second quarter, while our dairy and livestock loans declined by $14 million. Loan yields were 4.81% for the second quarter of 2018 compared with 4.67% for the first quarter of 2018 and 4.63% for the year ago quarter. At June 30, 2018, the allowance for loan and lease losses was $59.6 million, or 1.24% of total loans, compared with $59.9 million or 1.25% of total loans at March 31st, 2018. Net recoveries on loans were $648,000 for the second quarter of 2018, compared with $1.35 million for the first quarter of 2018, and $2 million for the second quarter of 2017, When the loan loss allowance is combined with the remaining fair market value loan discounts from our acquisitions, the allowance for loan and lease loss ratio was 1.37% as of June 30, 2018, compared with 1.43% for the prior quarter and 1.51% for the year ago quarter. At quarter end, non-performing assets defined as non-accrual loans plus other real estate owned were $10.2 million or 0.13% of total assets. This compares with $10.2 million or 0.12% of total assets for the prior quarter and $16.7 million or 0.20% of total assets at June 30th, 2017. At quarter end, we have loans delinquent 30 to 89 days of only $47,000. Classified loans for the second quarter were $40 million, a $3.2 million decrease from the prior quarter. We will have more detailed information on classified loans available in our second quarter Form 10-Q. Now I'd like to discuss deposits. For the second quarter of 2018, our non-interest bearing deposits total $3.98 billion, compared with $4.06 billion for the prior quarter, and $3.93 billion for the year ago quarter. Averaged non-interest bearing deposits were $3.96 billion for the second quarter of 2018, compared with $3.86 billion for the first quarter of 2018, and $3.89 billion for the second quarter of 2017. Averaged non-interest bearing deposits represented 60% of our total deposits for the second quarter, compared with 59% in the first quarter and 58% for the second quarter of 2017. Although rising short-term interest rates have created pressure to increase funding costs industry-wide, we continue to achieve our objective of maintaining a low-cost, stable source of funding for our loans and securities. Our cost of deposits and customer repurchase agreements for the second quarter was 11 basis points, and our total cost of funds was 12 basis points. Our cost of deposits and cost of funds have remained unchanged compared with both the prior quarter and the prior year. At June 30th, 2018, our total deposits and customer purchase agreements were $6.92 billion, compared with $7.20 billion at March 31st, 2018 and $7.24 billion for the same period a year ago. Interest income. Interest income for the second quarter of 2018 totaled $74.8 million compared with $72.7 million for the first quarter and $72.6 million for the same period a year ago. The increase in interest income for the first quarter of 2018 and the second quarter of 2017 were the result of increased loan yields of 14 basis points and 18 basis points respectively. The tax equivalent yield on earning assets for the quarter was 3.93 % compared with 3.80% for the prior quarter and 3.74% for the year ago quarter. Non-interest income was $9.7 million for the second quarter of 2018, compared with $12.9 million for the prior quarter and $10.8 million for the second quarter of 2017. When gains on the sale of OREO and securities as well as recoveries from loans charged off prior to acquisition, when those are excluded non-interest income actually increased by $794, 000 over the prior quarter, but decreased by $236,000 over the prior year. Now expenses. Non -interest expense for the second quarter was $34.3 million, compared with $35.9 million for the first quarter of 2018 and $36.9 million for the year ago quarter. The second quarter of 2018 included $494,000 in acquisition expenses, compared with $803,000 for the prior quarter and $1.3 million for the second quarter of 2017. Compensation and employee benefit expenses declined by $1.3 million, compared with the first quarter of 2018, driven primarily by a decrease in payroll taxes of approximately $800,000. Non- interest expense totaled 1.68% of average assets for the second quarter, compared with 1.77% for the first quarter and 1.76% for the second quarter of 2017. Now I'd like to turn the call over to Allen Nicholson, our CFO to discuss our effective tax rate, investment portfolio and overall capital position. Allen?

Thanks Chris. Good morning, everyone. Our effective tax rate was 28% for the second quarter compared with 37.5% for the second quarter of 2017. The reduction was due to the decrease in federal tax rates from 35% to 21% as a result of a tax reform act. Our effective tax rate can vary depending upon the amount of tax advantaged income, tax credits and discrete items such as stock compensation. Looking to our investment portfolio. At June 30th, 2018, our combined available-for-sale and held to maturity investment securities totaled $2.7 billion, a $37 million decrease from the first quarter. During the quarter, we purchased 98.7 million in mortgage-backed securities that had an expected average yield of 3%. Investment securities represented 36% of our average earning assets during the second quarter, which compared with 37% in the prior quarter. At quarter end investment securities available for sale totaled $1.93 billion, which included a pre-tax unrealized loss of $34.3 million. In addition, we had held the maturity investment securities totaling $772 million. The tax equivalent yield on the total securities portfolio was 2.48% for the second quarter, compared with 2.41% for the first quarter and 2.48% for the second quarter of 2017. Reduction in the federal tax rate has the impact of lowering the tax effective yield on securities in comparison to 2017. On a nominal basis, our investment security yields have increased modestly, with a 2.40% yield in the second quarter of 2018, compared with 2.34% in the first quarter and 2.35% in the second quarter of 2017. Now turning to our capital position. For the six months ended June 30th, 2018, shareholders equity increased by $14.2 million to $1.08 billion. The increase was due to a $70.3 million in net earnings and $2.1 million of various stock based compensation and other items, which were offset by $13.9 million in cash dividends and a $27.3 million decline and other comprehensive income from the tax affected impact of the decline in the market value of available-for-sale securities. I will now turn the call back to Chris with some closing remarks.

Thanks Allen. Let's talk about economic conditions. Turning to the California economy. According to various economic reports, California's unemployment rate was 4.2% in May, 2018, unchanged from the same rate in April, 2018 and 4.9% back in May, 2017. California can take some of the credits for the nation's economic growth having made outsized contributions to the US expansion over the past few years. California like the nation is expected to continue to grow its continuous growth spree over the next few quarters. Job gains in the state during the first five months of 2018 have outpaced the same period in 2017, and the unemployment rate is at its lowest level since 1976 when these records first started being maintained. Nearly all of California's industries have grown their job basis with greatest contributions over the past year coming from healthcare, leisure and hospitality and construction. There is continued demand for housing in California, driving up purchase costs. The supply of existing home has increased slightly but remains lean and new home construction continues to increase at a modest pace. In terms of the dairy industry, milk prices are expected to increase modestly for the second half of 2018, but are still projected to be slightly under the cost of production. Seed prices are expected to increase modestly as well. In closing, as we move into the second half of we remain focused on continuing to grow the bank in a conservative and balanced way. Loan pricing and structure competition are fierce. So we must make smart decisions that will benefit the organization in the long term. We also must remain focused on relationship-based deposits to ensure the quality and perpetuity of our core funding. We are very excited to be merging with Community Bank and continue to feel that this will be a great combination of two like-minded organizations that have both stood the test of time. That concludes today's presentation, Now Allen and I will be happy to take any questions that you might have.

[Operator Instructions] Thank you. Our first question today comes from Matthew Clark from Piper Jaffray. Please go ahead with your question.

Good morning. Can you quantify how much purchase accounting accretion contributed to spread revenue this quarter?

I'll let Allen do that.

Matthew it was roughly about $1.8 million in the quarter, which was a couple hundred thousand higher than the prior quarter, but generally within we bounced around within a couple hundred thousand each quarters, so fairly consistent.

Okay, great. And then Chris maybe you can give us an update on the timing of the deal closing. I mean that shareholders approvals, it looks like you just went on the regulators but any update on the timing of the close and the status of those outstanding there, fee rate issues.

Yes. So basically we had four groups that protested the acquisition, and we've had one of those groups withdraw their protest and recommend approval. And so my understanding is our application is in Washington DC with the FDIC right now. And we're hoping to hear any day. I don't-- we don't have any control over that. We feel like we've done everything we can. We've worked with these groups and everything and we certainly are running a very solid organization. So we're excited to get this thing done soon. And we still are hopeful that it's going to be here in the third quarter or the third quarter closed, which means we would need to close in August because we will not be able to close in September due to Allen and his team's stress level of trying to close in September on a merger.

Great and then just on the non -interest expense. I think you called out some payroll tax related items that decline in the quarter. Anything else unusual in that second quarter run rate if call it $34 million and whether or not that's a good run rate to use going forward knowing that this will be an-acquisition later on?

A good question on the expense side. I think we are really running efficiently. We're running this company as best as I've seen in my 12 years. I really think from both an offense and the defense and the expense side and everything that goes along with that. I think we're really hitting on all cylinders right now. And we're dealing with integrating and actually trying to close and then integrate an acquisition. So I'm really proud of my team and the job that they're doing, and they deserve a lot of accolades. So on the expense side; it's going to get choppy over the next few quarters because we're going to have more acquisition expenses. Our acquisition expenses actually went down in the second quarter for the first quarter, but it's going to go up in the third quarter assuming we close. And it's going to be high in the fourth quarter because then we consolidate right. We're going to -- I'm sorry we're going to convert -- we don't consolidate, yes, we're going to convert the operating system over and we're planning on November. Assuming we get approved in the third quarter here and get -- we merged in the third quarter. And then we're going to look at potentially consolidating office locations in the first quarter and maybe a little bit in the second quarter of 2019. So that will that will skew our expenses so to speak. Our expense run rate, we do give merit increases in July of this year. So that will have an influence of about $400,000 a quarter or something like that-ish. So that will be an expense on the salary side that will go up. I'm just talking about CBB now, but the rest of it is going to be more --the acquisition and expenses and all that which will skew things, but I think we're -- it was a good expense quarter for us, and a true expense quarter except right at $400,000 in salary and benefit expense. You --anything to add to that Allen.

No. I think you captured. I mean any trends you're going see Matthew is really going to be a lot of the increases and expenses with the mergers.

Right, okay. And then just on the loan growth front, a little slower than expected. I guess can you give us a sense for how much of that's just deliberate kind of run off and how much of that might be just a more competitive environment?

Yes. On the loan side, we are --we're seeing a lot of aggressiveness in the marketplace both on rate and structure. And we're seeing commercial real estate loans where banks are giving interest only periods for loans that are 70% or 75% loan to value on these things, and that-- and we really struggle with doing that. And we see guarantees being released. We struggle doing that with that as well. Doesn't mean we won't do loan without a guarantee. We just are --that's our kind of our last resort and sometimes we do it and sometimes we don't. We choose to play and sometimes we don't choose to play depending on the situation. And it's really a granular decision one by one by one, but it has to do with overall financial strength, stability and in our future identification of the cash flow, and strength of that cash flow et cetera, et cetera. So I'm finding a very competitive marketplace both on price and structure. And we are going to stick to what we do. And we have this lower cost of funds out there as anybody else. So when we want to compete on price, we can compete on price, but there has to be a risk-return component in these decisions. And sometimes I'm not seeing anybody build in any credit risk. There's just pricing down to the bone here and that has caused us to pass on some deals. Our prepayment penalties were elevated in the second quarter. I was surprised to see they were as high as they were. I think we were about a million -- were 912,000 dollar-ish for the second quarter, and a 1.4, almost 1.5 million for the year-to-date. That's higher than where we were last year, which is surprising to me because with increased interest rates, you think that our prepayment tunnels would be going down. Some of that's a function of people higher real estate prices and then people cashing out, and some of it's a function of us choosing not to go along with some of their credit structuring and or pricing structuring that we're seeing the marketplace. So we're battling hard out there. Our loan productivity, we actually finished a quarter pretty strong. And we're kicking off the third quarter pretty well, but talk to me next month, right, anyways we'll see, but we're trying to stay very disciplined on that okay.

Our next question comes from Aaron Deer from Sandler O’Neill. Please go ahead with your question.

Hi, good morning, guys. Shifting to the to the deposit side, just curious if there was anything unusual first in the deposit flows in the quarter, and then just it kind of given the outflows, it largely and in core accounts mainly non-interest how are you viewing those losses versus kind of current opportunities in terms of deploying funds and what you're --whether it would be may make sense to pay up for deposits at this point or continue to let some of these funds runoff?

Yes, great question. And we are really focused on relationship based deposits and the vast majority of our portfolio we feel it that way. Certainly the 60% of their non-interest we feel it that way. There are some deposits that we have extricated ourselves from over last year and half. And this has been a process that we've going through. A while back we had state CDs which I mentioned several times in the call where we had $300 million in state CDs. Well, today to those state CDs, you are looking at 1.75% rate or more or more. We don't think that makes sense for us to pay up that kind for deposit. We've had other areas of some of our government deposits, the money market aspect of those have gone into what's called the local agency investment fund where they can get about 1.8% on a money market rate that's guaranteed by the state. We have chosen not to match or get near matching those rates. We've let those deposits go and that's a couple hundred million dollars there. So we're making these decisions again I think prudently it just doesn't make sense for us to fund our company based on a kind of a Fed Funds type of rate, especially if we're not-- especially we don't have that money to put in loans, because right now if we buy a mortgage-backed security of 15-year mortgage back, we're looking at something fairly over 3% with a 4.5 year duration. Yes Allen do you agree with those numbers?

That's correct.

And so to go ahead and take a deposit or some type of funding that's tracking Fed Funds when we're supposed to see another rate increase or two this year and potentially to next year is a scary proposition when you're only getting something like 3.05 or 3.10 on a 15-year mortgage backed security. We can go into floaters but we're going to get a lower rate on floaters and then we're going to have about a 75-80 basis points margin between those two things. Well, our company doesn't -- isn't satisfied making 80 basis points return on asset pre-tax. We made 172 for the quarter. So we are purifying our balance sheet. We're focused on real core business and the beauty of our company is we can afford to do that because we're 72% or whatever it is loan to deposit ratio.

Sure, well, that I guess it with respect to then to securities I guess the anti period investment securities dropped by about $250 million average balances were down $100 million or so, somewhere around there. So given kind of what you've just discussed what are your thoughts from where those balances go? You're heading into third quarter, I guess particularly with respect to average balances given some of the investments that you may be making. Are those going to -- your average balances is going to continue to trend lower if we see pick up some.

Well, we're hoping to close the Community Bank deal in the third quarter. And the Community Bank; deal, they have some funding there, they have about $500 million in federal home loan bank debt. And whether that's over either --

Overnight or term.

Overnight or term, that's all expensive debt and will be marked in the mid 2s or high 2s right?

Yes. Depending on the duration, roughly right.

So that's funding that we probably will not want to keep, and there are other maybe non-relationship deposits that are high cost that they have that we may not want to keep either. So as far as the security portfolio, their securities portfolio what we're looking at doing is potentially liquidating that portfolio or portion of that portfolio to pay off this debt because we're not really making any margin on this. So there isn't --there is a shrinkage factor that we're looking at and but on the other hand the bad --that's the bad news we may not make that slight incremental income off that because we won't make much of that, but our return on assets should be very -very strong considering the loan to deposit ratio of theirs because we'll be able to fund their loans with basically our deposits.

Our question comes from Brian Zabora from Hovde Group. Please go ahead with your question.

Thanks, good morning. Yes just to follow up on that kind of loan deposit ratio discussion. Your post acquisition you're still very --you have a lot of liquidity but is there a loan to deposit ratio that you'd like to stay under or a target ultimately?

Yes, no, I just don't know --I think if I could wave a wand and say what the perfect level is for us, I'd say to 80% to 85%. And the reason I don't say higher than that is I always want the flexibility not to have to chase interest rates on the deposit side. And we're seeing a lot of our competition chase those rates right now. And I mean it really did --I don't know if it's going to come out the numbers in the second quarter but we're feeling in the marketplace. And there's desperation for some of the banks that are loaned up if you will. If they're 100% loan to deposit ratio, they have to -- we --to these deposits. I don't want to be in that position. I want to be able to run the business like we want to run the business without a funding gun to my head if you will. So I like that 80% to 85% level.

That's helpful, thanks. And then just a question on the loan yields. Do you mention the higher prepayment penalties? Could you just update us on how much is variable rate at this point and like how much benefit do you see with each fed growth.

Brian, purely variable in the loan portfolio is about a quarter, but we do have a lot of adjustable, so depending on where you're on the cycle, you start to see things that might adjust, that their annual et cetera. So I think what you've seen over the last year in terms of the improvement in our loan yield as you've seen the Fed increases, it's fairly representative of what we would expect going forward if rates continue to go up.

Our next question today comes from Jackie Bowen from KBW. Please go ahead with your question.

Hi, good morning, guys. Looking at loan yield in the quarter, I know it had --there's fluctuations given accretable yield and prepayment. When you think about the yield and its movement alongside rates outside of those noisier items, do you have a sense for what the loan yield did in the quarter?

I think the loan yields were quarter -over- quarter were up probably still in the 9 to 10 basis point range, if you tried to take out every --

Excessive prepayment -- unusual prepayment risk.

I think it's roughly still, yes.

We're feeling that margin expansion and because our really --our cost offense isn't changing and the variable rate loans are the 25% if you will are adjusting, but remember that a lot of our commercial real estate portfolio while it doesn't adjust immediately is adjusting probably 20% a year or close to 20% a year that resetting a lot of those prices too, and those are going up. The flatness of the yield curve on the commercial real estate I mean for the fixed-rate side has not gone up as much as we'd like to see, but it is still higher than it was. I think we looked at commercial real estate loan originations from a year ago and the average commercial real estate fixed-rate loan that we're originating now is 25 -30 basis points higher than it was a year ago. Is that correct? Yes. So I think there's a pickup there too it just takes a little longer for that to kick in. So we feel good about the margin. Look at we'd love a real yield curve with a real --if that doesn't flatten out at the end, but if there's --we feel like we're --if this is the way it's going to be, we can still make some good money in this environment. And it really puts I think more pressure on our competitors than it does CVB because of our funding.

So are we hitting a point now given that we've hit a stride with Fed Funds and we're seeing more continual increases rather than just one a year where the --as commercial real estate reprices, it's much more of a benefit than it was say a year ago.

Yes. I would say it's more of a benefit not much more of a benefit and that's because of the flat yield curve. I mean when the 10 -year treasury is sitting here at 290 and the Fed Funds rates 2% and the two year treasuries at 260 and we have a 30 basis points difference between those things, that's in general that's not good for Community Bank who take their funding short and lend long. The reason it's playing out pretty well for us is because our funding is very much business deposits and 60% of its non-interest bearing. And very much relationship deposits, but if you don't have that I mean I feel like the banks that are going to be really challenged are the S&L type banks that are funding with higher priced dollars, individual money primarily CDs and money markets and things like that. They're competing with the online people like the Goldman Sachs' and the ally banks of the world and so forth for those deposits. We're not competing with those guys for the deposits. That's not what -- we're not doing that. So I think that's where some strain and then and mostly when you're dealing with an S&L type bank they are doing multifamily and that type of loan which is fixed rate typically five -seven year fixed rate paper when amortized is over 20-25-30 years. So I think those are the more pressured. We are -- here's pressure for us too but we've been able to spread our margins. And I and I would hope that we can continue that but if the curve flattens more and it gets inverted that'll become challenging for us too.

Well, we have a whole host of problems if that happens.

We are not following.

Just one last one then. I understanding what you're planning to do or potentially do at Community's balance sheet in terms of their funding and securities and everything. When you think about your legacy balance sheet and continue to upward movement in rate, is there a lot more of those deposits that are not particularly relationship based that you could see outflow over the next couple of quarters or have you largely hit a point where what's left is strongly relationship?

You are talking about CBB not consolidated, right.

Yes, CBB, yes.

I think there certainly I would say the answer to that is yes. We've worked our way through the vast majority of that. Are there still some others that are potentially in there? Yes. Are we --but I'll tell you what, one of the things that I think a lot of banks out there are going, we need loan growth. One of our huge focuses right now is core deposit growth because all everything falls in place if you can grow your core deposits in a healthy way, and you can control your funding. Everything else is you can do, you can put together you can figure that part out. So we're enhancing our incentive programs for our people to bring in non interest bearing deposits. We're getting people focused and more refocused on core deposits. And so I think you're going to see us fare pretty well here going forward in controlling our costs, and in particular deposit costs. I don't think we'll have a zero beta though. I mean that's we can't keep doing a zero beta and we've let --if you really look at our deposits from a year ago, we're down --if you include repurchase agreements we're down by about $300 million and that has been --I won't say it's on purpose but we have allowed that to happen for the various reasons that I mentioned earlier.

Our next question comes from Tim Coffey from FIG Partners. Please go ahead with your question.

Great, thank you. Good morning, gentlemen. Chris, I might have missed this in your prepared remarks but can you give me an idea of what some of the markets were for you in terms of loan production this quarter?

I think it's been interesting because I will say the number one producing region in the bank has been Orange County for the last two years, in terms of terms of gross loan production, followed by LA County which you would expect. LA County's got the most loan so you'd expect them to be the best but Orange County's that are-- but it's really everybody is --we don't have any real holes so like we're saying oh boy those guys are carrying their weight or they're not doing this. They're all working hard and making decisions and trying to grow quality loans and but I mean but we are very mindful of the type of credits we're putting on. And I do think we're getting later in the cycle here. I'm not saying we're going to be in a recession soon but I don't think we're in the third or fourth any of the baseball game. I think we're in the -- anywhere from the six to the bottom of the seventh or something like that. So we're getting closer to the back end of this cycle and we just want to make sure we're prepared, and we're thoughtful in everything we do.

Okay, and then this kind of talking about the dairy portfolio, over time your dairy clients have moved out of California. The ones that are still here are you concerned that they might also leave the state and what impact would that have on your dairy business?

Yes. I'm not that concerned that they'll leave. A lot of these dairy customers we've moved with them. So we're banking now I think 40% of our loan totals are outside the state of California in dairy. So when you see like when we post up our presentations and you see out of state, the vast majority of those out-of-state loans are dairy loans because we've moved with them. So we're not -- and our group is we have 11-12 person group backed up by credit administrators and so forth. And they're handling roughly between the real estate side and herd and feed lines they're handling roughly $400 million in loans. So it's not a big deal if they move out of state. We will try to move with them. Our focus is just on really making sure we're only banking of what we consider the top 25% of dairies. The dairy business has done a tougher business in the last decade than it was in the previous couple decades before that. And we're seeing that kind of ebbing and flowing in terms of between milk prices and feed prices and it's agribusiness has been making more money than the dairy business as of -- in the last several years, and that may continue but we believe the stronger dairies will survive, and we've got some really good dairies in the bank, and we're focused on them.

At this time, I am showing no additional questions. I'd like to turn the conference call back over to Mr. Myers.

Thank you very much. I want to thank everybody for joining us again this quarter. We appreciate your interest and look forward to speaking with you again in October for our third quarter 2018 earnings call. We're excited about what's going on in Citizens Business Bank right now, and we think there's tremendous opportunity both organically and through the acquisition merger with Community Bank. And we are --I think we have a very motivated team here and Citizens Business Bank is on the move. Have a great day and thank you for listening.

Ladies and gentlemen, the conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.