S&T Bancorp - Q2 2024
July 18, 2024
Transcript
Operator (participant)
Welcome to the S&T Bancorp second quarter 2024 conference call. After the management's remarks, there will be a question and answer session. Now, I would like to turn the call over to Chief Financial Officer, Mark Kochvar. Please go ahead.
Mark Kochvar (CFO)
Oh, thank you, and good afternoon, everyone. Thanks for participating in today's earnings call. Before beginning the presentation, I want to take time to refer you to our statement about forward-looking statements and risk factors. This statement provides the cautionary language required by the Securities and Exchange Commission for forward-looking statements that may be included in this presentation. Copy of the second quarter 2024 earnings release, as well as this earnings supplement slide deck, can be obtained by clicking on the Materials button in the lower right section of your screen. This will open up a panel on the right where you can download these items. You can also obtain a copy of these materials by visiting our investor relations website at stbancorp.com. With me today are Chris McComish, S&T's CEO, and Dave Antolik, S&T's President. I would now like to turn the program over to Chris.
Chris?
Christopher McComish (CEO)
Mark, thank you, and good afternoon, everybody, and welcome to all of you to the call. We appreciate the analysts being here with us, and we look forward to your questions. I'm going to begin my remarks on page three, but before I do, I do want to take a minute to thank our employees, shareholders, and others listening in on the call. To our leadership team and our employees, your commitment and engagement is what drives these financial results that we're going to discuss. These results are yours, and you should be very proud. Our performance this quarter reflects our continued progress centered on S&T's people-forward purpose, and more specifically, how our focus on this purpose is delivering for our customers, shareholders, and the communities we serve.
As we've discussed before on this call, this purpose defines who we are, and our values define how we do our work. All of this is connected to the four core drivers of our performance: the health and growth of our customer deposit franchise, delivering consistent, solid credit quality, best-in-class core profitability, all of this underpinned by the talent and engagement level of our teams. This is where we are focused, and this focus is what's delivering for our shareholders. To sum it up, we made strong progress on all four of our performance drivers as they've showed great progress and they've produced the results that you will see in this deck. Turning to the quarter, our $34 million in net income equated to $0.89 per share, up 8 cents from Q1.
Our return metrics were excellent, with a 15% ROTCE, while our PPNR remained strong at 1.82, and the efficiency ratio was below 55 at 54.92. Our NII and NIM both improved versus Q1, as our net interest margin was at 3.85, which is very strong. This is a direct result of very solid customer deposit growth and mix shift in our deposits, which led to a moderating cost of funds. Mark will provide more detail here. Our credit quality remains stable to improving, and Dave is going to dive more deeply here in a few minutes. He will also have additional detail provided on our multifamily and office CRE exposure, and we'll also touch on the pickup we're seeing in our loan pipelines.
Moving to page four, while loan growth was in line with previous guidance, while we saw meaningful deposit growth. On the deposit side, customer deposit growth was more than $150 million in the quarter. This was after $75 million of growth in Q1 and produced over 8.5% annualized growth. While mix shift continued, $17 million in DDA balance growth resulted in strong performance and overall DDA balances remained strong at 29% of total balances. The customer deposit growth allowed us to reduce wholesale deposits and borrowings by $85 million, which obviously has a positive impact on our net interest margin. I'm going to stop right there and turn it over to Dave, and he can spend a little bit more time on the loan book and credit quality.
Then Mark will provide more color on the income statement and capital. I look forward to your questions.
David Antolik (President)
Well, thanks, Chris, and good afternoon, everyone. If I can direct your attention to slide five in order to walk you through our asset quality results for Q2. As presented, our allowance for credit losses grew by $1.3 million in the quarter, which represents a modest increase from 1.37% to 1.38% of total loans. A number of factors influenced this outcome. First, we are actively executing on our exit strategy with the one Western Pennsylvania relationship that I mentioned last quarter and have established a specific reserve for that credit of $2.9 million during Q2. Second, we continue to see improvement in our rating stack through reductions in our criticized and classified assets.
Those C and C assets declined by 12% quarter-over-quarter and are down 29% year-over-year. That equates to a $107 million reduction in the past four quarters. Finally, we experienced a net recovery of $400,000 during Q2. In addition, NPLs remain at a very manageable 45 basis points of total loans plus OREO. During this period of modest loan growth, our efforts continue to be focused on improving asset quality as a fundamental driver of our financial performance. Looking forward, we expect loan growth for Q2 to Q3 to be in the low single digits, driven primarily by consumer and retail mortgage activities.
As our pipelines for commercial and business banking grow, we do expect that, that will point towards increased growth in Q4. Turning to pages 6 and 7, we've included updates relative to our office and multifamily, CRE portfolios. Starting with office, we saw a reduction in balances of $20 million, and the total number of loans in this, portfolio quarter-over-quarter, as loans in this category continue to amortize and, payoffs occur. Highlights include small average loan size, diverse geography, manageable maturity concentrations, and limited CBD, exposure. Moving to multifamily CRE, where we continue to have a positive outlook for this segment in the markets that we serve. As a reminder, that includes Pennsylvania and the contiguous states of Ohio, Maryland, and, Delaware. And performance of these assets continues to meet our expectations.
During Q2, outstandings in this portfolio increased by approximately $25 million, primarily the result of construction loans converting to permanent loans. In addition, we added new construction commitments of $15 million. It's important to note that these new construction loans are underwritten to current credit standards, including 25%-30% equity, LTVs below 65%, and debt service coverage ratios in excess of 1.20 at 25-year amortizations and using current interest rates. We anticipate the construction, completion, and stabilization cycle to continue to put downward pressure on these balances as permanent financing options for these loans are available and include favorable financing terms, including 30-year amortizations and extended interest-only periods. I'll now turn the program over to Mark. Mark?
Mark Kochvar (CFO)
Hey, thanks, Dave. On next slide, the second quarter net interest margin rate of 3.85% is up one basis point from the first quarter, and net interest income increased as well, which represents an improvement from the last several quarters of declines. Strong customer deposit growth allowed to pay downs of brokered CDs and wholesale borrowings. Mixed changes continue to moderate, with an increase in DDA for the quarter, both point in time and average. This resulted in the slowing of the increase in the cost of funds, shown on the bottom left, to just five basis points in the second quarter. We expect funding cost pressure to continue to moderate with net interest margin at or close to bottom now, not factoring any, any Fed increases.
We are still asset sensitive on the front of the curve, and should the Fed decide to move rates lower, we would expect 2-3 basis points of net interest margin compression for each of the first couple of 25 basis point cuts. Moving on to non-interest income. We saw improvement here, but it was primarily due to some seasonal changes in debit and credit card fees. We did recognize a $3.1 million gain related to Visa Class B-1 shares that we own. That is in the other category here. We took the opportunity to sell about $49 million of lower-yielding securities, picking up about 370 basis points with an earn back of just over two years. Non-interest expenses, on next slide, declined $0.9 million in the second quarter compared to first. That's in line with our expectations.
Most of the favorable variances here are timing related. We are experiencing higher than normal medical expense this year, especially in the second quarter. As a self-funded plan, we have seen some higher claims. We expect our run rate, though, on the expense side to continue to be approximately $54 million per quarter moving ahead. Lastly, on capital, the TCE ratio increased by 18 basis points this quarter. TCE remains quite strong due to good earnings and relatively small securities portfolio. All of our securities are classified as AFS. Capital levels position as well for the environment and will enable us to take advantage of organic or inorganic growth opportunities, as we look forward and move into the latter part of this year. I would like to...
We had a question that came in prior to this call. It was related to the amount of pure floating rate loans that we have currently on the balance sheet and the yield on those loans. So right now, our balance sheet on the loan side, we have about 39% of our loans are tied to Prime or SOFR. An additional 25% are ARMs, and the remaining 36% are fixed. In addition to that, we do have about $500 million of swaps. If you factor that in, those are received fixed swaps, that would bring kind of that floating exposure down to about 33% of the net loan book, if you factor that in.
The yield on those on the floating side is right at 8% on a blended basis. The ARMs are at about a 5.36, and the fixed rate is about a 5.18. So with that, I'll turn the call over to the operator to allow for other questions to be asked.
Operator (participant)
The floor is open for questions. If you have any questions, please press star one on your phone, and we ask that while asking your questions, please pick up your phone and turn off speakerphone for enhanced studio quality. Please hold while we poll for questions. Thank you. Your first question comes from the line of Daniel Tamayo with Raymond James. Please go ahead.
Daniel Tamayo (Analyst)
Thank you. Good afternoon, guys. Thanks for taking my questions.
Mark Kochvar (CFO)
Good. Thank you.
David Antolik (President)
Good day.
Daniel Tamayo (Analyst)
Yeah, so I, you know, I apologize. I heard most of your guidance, especially on Mark's side, but I think I missed the NIM before you talked about the rate cuts. Can you just repeat what you said about where you expect the NIM to go from here?
David Antolik (President)
... Yeah, again, we do expect some cost of funds pressure, but the NIM, we think we're you know really pretty close to the bottom here. So it might be, you know, plus or minus a couple basis points either way, but we think that's kind of stabilized a little bit sooner than we had thought.
Daniel Tamayo (Analyst)
Okay. So, you know, I guess it was—it was a bit of a surprise to see the margin expand in the quarter, and that was, you know, driven by the good performance on the funding side. And it seems like you were able to lower broker deposits and FHLB. So I guess first, where are broker deposits in terms of balances at the quarter end? And then second, you know, what do you think your abilities or opportunities to reduce those as well as the FHLB going forward are?
David Antolik (President)
Yep. So at quarter end, we had an additional $300 million of brokered, and we still have about $200 million in that BTFP program. That one doesn't mature until January, and it has a little bit of a favorable rate. It'd take a couple of cuts before it would make sense to pay that off. It has a sub-5 rate. The brokers, you know, we'll look as, you know, depending on how the deposit and loan books go over the quarter. We have some maturing, I think over $100 million maturing in Q3, that we should be able to reduce. We also have some floating rate brokers that are not CDs or money markets. Those we could reduce at any time.
It's just depending on how the rest of the balance sheet looks.
Daniel Tamayo (Analyst)
Okay, perfect. And then lastly, the balance sheet repositioning in the second quarter, when did that take place? And then what was sold and what was purchased, if you have used those funds already?
David Antolik (President)
Yep. So, it was done in the latter part of June, so late in the quarter, so there's not a whole lot of impact of that in the margin. We sold $49 million, primarily a couple of treasuries and a few mortgage-backed agency CMOs that we have, or, excuse me, commercial-backed mortgages that we have. We repurchased similar CMBS-related assets and CMOs farther out the curve, kind of with a 5-6 duration level, and picked up about 370 basis points on that trade.
Daniel Tamayo (Analyst)
370 basis points. Okay, great. Okay, I'll, I'll step back. Thanks for all the detail.
David Antolik (President)
Sure.
Operator (participant)
Your next question comes from the line of Kelly Motta with KBW. Please go ahead.
Kelly Motta (Managing Director)
Hey, hey, good afternoon. Great quarter.
David Antolik (President)
Thanks, Kelly.
Kelly Motta (Managing Director)
I was hoping—thanks for the commentary about the loan pipeline, the commercial pipeline strengthening. Just wondering if you could give us additional color on what you're, what you're seeing with that. Is there any, you know, particular, you know, area where the pipeline is strengthening, either by region or, or loan type? And what are you attributing that to? Is it, you know, the expectation of rate cuts? Is that impacting borrowers, you know, starting to come back with more demand, economic activity? Just any qualitative color around that would be excellent.
David Antolik (President)
Yeah, it's a mix of activity, and it's throughout our regions. I think there is some pent-up demand relative to rates moving downwards. So I think folks are in it with that anticipation of rates down. They're looking at the possibility of, you know, refinancing or moving forward with projects now that there's some better visibility amongst our customers relative to rates.
Christopher McComish (CEO)
Yeah, and Kelly, I'll just add to Dave's comments. This is Chris. I've had a number of conversations with our team leaders, as have Dave, commercial banking team leaders throughout the geography over the last, you know, as we were heading into the end of the quarter. And they're seeing a lot more activity in the marketplace. I would agree with Dave that it's across the board, probably a little more C&I than CRE, obviously, given the state of CRE and our business banking pipeline continues to grow. I just think there's a feel, a sense almost, you know, a little bit more optimism out in the marketplace from a customer base standpoint is part of it.
Kelly Motta (Managing Director)
Got it. That's super helpful. And then on the commercial real estate side, you know, I appreciate that it was excellent here, and you actually had net recoveries this quarter. But, how are you feeling? It seems like the tone, not just on growth, but also on credit, might be a bit more optimistic than last quarter, I'm hoping. You know, what are you still watching closely? Any, you know, pockets of weakness that we should keep in our sights here?
David Antolik (President)
The way we manage that risk is to look at what those results look like for those customers relative to current financing options, right? So if you have something that's in the midst of a 5-year ARM, maybe you're 2 years in, we re-underwrite that to the current conditions and see what that cash flow looks like to get ahead of potential issues. And, you know, our performance relative to that kind of stress testing has been good. So we're happy with the results. And as I mentioned in my prepared comments, you know, our underwriting standards have moved to be a little more conservative relative to loan-to-value. And, you know, we always have a kind of a plan B relative to refinancing of these assets or the sale of these assets.
That's why, you know, we've stuck to things like 25-year amortizations in the multifamily space, you know, to give ourselves room in the event that we need to reposition an asset. You know, the challenge in the CRE space is really construction costs and, you know, the borrowers' and developers' ability to get a decent cash-on-cash return, given the cash flows that these assets and projects can produce. So, you know, the good ones will find a way to get a project done with additional equity and get a return, and that's what we're seeing, you know, relative to the movement I described in our multifamily construction portfolio. And we'll continue to support them because we like the results that we see.
Kelly Motta (Managing Director)
Awesome. Thanks so much. I'll step back.
David Antolik (President)
Sure. Thanks, Kelly.
Operator (participant)
Your next question comes from the line of Matthew Breese with Stephens.
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Hey, good afternoon, everybody.
Christopher McComish (CEO)
Hey, Matt.
David Antolik (President)
Hey, Matt.
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Hey. Mark, I appreciate the color on the floating rate, floating rate exposure and the yields. You know, what was interesting there was how low the fixed rate and the ARM portfolios are, in the low 5% range. I guess my first question there is, you know, one, what are the new, loan yields for those books? I'm assuming they're a good 250 to 300-- 250 basis points higher. Yeah, that's the first one.
David Antolik (President)
Yep. So, new yields, yeah, on the mortgage side, they're, you know, just under 7, probably about a 6.68 around there. And on the other kind of ARM books, they're also quite around right around 7.
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Okay. And as we think about that dynamic of the fives, the five, you know, low 5% rates, resetting into the high 60s, is that helping the NIM outlook as we think about rate cuts later this year and into 2025? I mean, you know, cycle to date, your, your loan beta is kind of knocking on about 50%. Would you expect that to be better as we head into the next rate cutting cycle?
David Antolik (President)
Yeah. So we generally see and expect to continue to see around 4-5 basis points on the loan side of repricing benefit, you know, before you get to any type of rate cuts. And that's, you know, just kind of the natural repricing of the fixed book and those ARM resets. The other thing that will begin to help us in 2025, starting at the end of the first quarter, is that the $500 million that we have in swaps, those are laddered out pretty much $50 million a quarter, starting in first quarter of 2025. And so those will have a repricing or a maturity opportunity for us.
Those are, you know, kind of in a negative position by anywhere from 250-350 basis points. So we'll have an opportunity to reset those starting in late Q1.
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Great.
David Antolik (President)
So that-
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Okay
David Antolik (President)
... that will support later.
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Very helpful. You know, one of the things that was really nice this quarter was the provision with the net recoveries. You know, I was hoping you could provide some color on how you think the provision will shake out for the back half of the year. And if you can't answer that directly, you know, how comfortable you feel with the overall reserve level at 1.38 here?
Mark Kochvar (CFO)
I think overall, I mean, we're, you know, by definition, comfortable with that 138. What we are seeing, and Dave alluded to that, is, you know, over the past several years, we've been working up with a much higher, relative to peer, amount of criticized and classified, you know, special mention substandard loans. That has, you know, forced us, essentially, to have a higher than peer ACL level. Those are improving quite a bit, you know, as Dave mentioned, over $100 million this year to date. So as that moves through that pipeline, the need for reserve, you know, begins to moderate. So we're seeing that already, where the kind of quantitative part of our model is directing us to a lower level of needed reserve.
We do expect that to continue barring, you know, anything unexpected on the macro front. So that will provide continued support just from a ACL need standpoint. On the charge-off standpoint, I mean, you know, we're not, we don't have anything in our sights other than the one significant credit that Dave, Dave mentioned. But that, you know, again, can change at any time. But, you know, we're feeling pretty good about asset quality at this juncture.
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Okay, great. I appreciate that. And then, you know, with the balance sheet at $9.6 billion, I know in past quarters you guys have provided plenty of detail on the Durbin impacts. One thing I was curious on is just the preference on how you cross. Is there a preference to do it organically or through M&A? And just love some color there.
Christopher McComish (CEO)
Yeah. What all of our plans, Matt, are to focus on that which we have direct control over, which is our organic growth. And so we're preparing to cross over as the result of organic growth. And, you know, we had approximately $100 million a quarter of assets. That would take us, you know, between now and this time next year... Right? And so we've been, you know, over the past three years, we've been firmly focused on building the foundation of our company, building the infrastructure to move through that level, so that we have, you know, we're in compliance with rules and regs and all the additional standards that are required.
That being said, we believe we're more, you know, the marketplace is becoming more, many more discussions relative to inorganic growth opportunities, and that's a key component of our future and our desire to be a bigger player in the markets that we serve and in this general geography. So it's an and both. We're not gonna, you know, we're not gonna slow down organic growth to wait for something that could happen in the future. But by the same token, we're preparing for that event, should it happen for us.
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Okay. Then just my last one and tied to M&A is just, you know, what is your preference in terms of geography for deals or types of banks that you'd look, you know, look to partner with?
Christopher McComish (CEO)
Yeah. So we're very focused on kind of the geography that we're in and kind of contiguous states. And so, you know, you could look as, you know, far south of here into the, you know, Maryland, West Virginia, Virginia area, east into Ohio, you know, and then obviously here in Pennsylvania, in the markets that we're in, in Pennsylvania and looking to expand there.
Matthew Breese (Managing Director and Senior Equity Research Analyst)
Great. I'll leave it there. Thank you for taking all my questions. Appreciate it.
Christopher McComish (CEO)
Sure thing.
Operator (participant)
Again, to ask a question, please press star one, and your next question comes from the line of Manuel Navas with D.A. Davidson. Please go ahead.
Manuel Navas (Senior Research Analyst)
Hey, good afternoon. Can you talk about deposit pipelines a bit more and the competition there? It seems like you might have a little bit increase in deposit costs, but you're still getting some nice flows. If you could just talk through that a bit.
Christopher McComish (CEO)
Yeah, I'll start and then have Dave jump in because it's just so core to what we believe as a company, and it was long before this, you know, dramatic rate rise in interest rates. We believe that, you know, the customers define themselves as to where they bank with from their deposit relationship and our, the customer experience, customer loyalty that we have, along with, you know, we're big enough to have the product capabilities that we need. It's been a strategic focus of ours over the past few years, and it's starting to pay dividends. So we've developed products. You may have, I mean, we've talked about some of the work we've done on the treasury management side, not just with more people, but also product capability. That's both for our commercial customers and business banking customers.
That's been a big focus of ours. We also have been very focused on our existing customer relationships and recognizing that we've got tremendous customer loyalty. And during a time of great disruption, our proactive outreach pays dividends for us. And so what we've seen is expansion of customer relationships throughout the company, our retail consumer customers, our business banking customers, and our commercial customers, all, you know, getting a greater share of wallet with those relationships due to our focus as well as the alignment with the loyalty. I think Dave can talk about activity levels and pipelines and things like that.
Mark Kochvar (CFO)
Yeah, just to add to Chris's comments, you know, if you look at Q2, the growth was really widespread across all of our divisions: the commercial, the treasury management that supports commercial and business banking, as well as consumer. So the focus has been and will continue to be growing wallet share with the existing customer base. You know, that being said, we are also in the business of attracting new clients as well. Because that activity has been, I'll call it, consistent for the last six months. You know, we're seeing new opportunities. Those tend to be more rate competitive opportunities. So we feel that, you know, continuing to focus on the existing customer base, building out capabilities from a product and service perspective is going to propel us forward.
We still believe there's ample opportunity within the existing customer base to move the needle and continue to grow deposits.
Christopher McComish (CEO)
The other part of your question, Manuel, I think related to kind of what's the competitive environment look like.
Manuel Navas (Senior Research Analyst)
Mm-hmm.
Christopher McComish (CEO)
You know, customers are still rate sensitive, but it's not at a kind of a fevered pitch as it was as rates were moving up very quickly. I think there's more stability in the market, and therefore, we have the ability to, you know, through our proactive outreach, to have conversations that give us a better chance of winning versus losing and doing it at a rate and a fee structure that makes sense.
Manuel Navas (Senior Research Analyst)
That's really great color. In terms of the deposit flows, is that kind of where, with the NIM kind of bottoming and maybe some stability here before rate cuts, is that a kind of where there could be a wild card? Do you have borrowing paydown in your guidance or any excess deposit growth that pays down brokered, that pays down borrowings? Is that, could that offer a little bit of upside on NII and NIM?
Mark Kochvar (CFO)
Perhaps a little bit. I mean, we still have, you know, wholesale levels of around $500 million, so there's still some opportunity to replace those higher cost funds.
Manuel Navas (Senior Research Analyst)
Sure. Okay.
Mark Kochvar (CFO)
That is kind of somewhat built into where we're headed over the next several quarters.
Manuel Navas (Senior Research Analyst)
Okay, great. And if there's extreme access, that would be where it could potentially be some upside?
David Antolik (President)
... I'd love to have that problem.
Christopher McComish (CEO)
Yeah.
Manuel Navas (Senior Research Analyst)
Has this better NIM changed your evaluation of where it could bottom at some point next year? You know, I believe we're gonna have some rate cuts.
David Antolik (President)
Right.
Manuel Navas (Senior Research Analyst)
Where do you think it could bottom, and could that be a little bit higher than maybe expectations previously?
David Antolik (President)
Yeah, I think, I mean, overall, I think we landed at a bottom that's, you know, maybe around 10 basis points higher than we had anticipated. So our expectations for the impact of on a per cut basis haven't changed. So all else equal, you know, it'd be like 10 higher, I think, for depending on how many cuts there are.
Manuel Navas (Senior Research Analyst)
That's great. That's transformative. Do you have a little color on the recovery? This is my last kind of question.
David Antolik (President)
I think it was more about that there weren't any charges.
Manuel Navas (Senior Research Analyst)
Yeah.
David Antolik (President)
We typically have a certain, you know, small level of recoveries that our special assets folks are working on, but it's the fact that there was no significant charges at all in the quarter.
Manuel Navas (Senior Research Analyst)
Perfect. I appreciate that. Thank you. No further questions.
Christopher McComish (CEO)
Thank you, Manuel.
Operator (participant)
Your next question comes from the line of Daniel Cardenas with Janney. Please go ahead.
Daniel Cardenas (Director and Equity Research Analyst)
Good afternoon, guys.
Christopher McComish (CEO)
Hey, Dan.
David Antolik (President)
Hey, Dan.
Daniel Cardenas (Director and Equity Research Analyst)
Mark, I'm sorry, I missed your comments on the criticized and classified levels that you made earlier. Can you maybe just kind of repeat those for me? I'm just trying to get a sense as to you know, where those levels were at the end of the quarter versus last quarter.
David Antolik (President)
Yeah. So we're down 12% quarter-over-quarter, and 29% year-over-year. I think the dollar amount for the quarter was about $38 million. It was about $38 million for the, yeah, for the quarter and $107 million year-over-year.
Daniel Cardenas (Director and Equity Research Analyst)
Great.
David Antolik (President)
And we think there's still some room to improve there as well.
Christopher McComish (CEO)
Yeah. And that goes right back to that, you know, we talk about our four drivers, and that number two is asset quality, and the entire team is focused on it, and we're really working proactively to enhance and build relationships that represent long-term opportunities for us and those that don't necessarily fit our either credit profile or where we're headed long term. That's those are those that we're moving out. And the results kind of speak for themselves so far.
Daniel Cardenas (Director and Equity Research Analyst)
Gotcha. Gotcha. Okay, perfect. And then, on the fee income side, so the core number that we saw this quarter, backing out the Visa transaction and the securities, the offsets on the security side, is that kind of a good run rate to build off of here for the back half of 2024?
David Antolik (President)
Yes. We'd expect, you know, around, around that $13 million a quarter level.
Daniel Cardenas (Director and Equity Research Analyst)
Okay, perfect. And then, what was your AOCI number for this quarter?
David Antolik (President)
It's $93 million.
Daniel Cardenas (Director and Equity Research Analyst)
Okay. All right. Perfect. Perfect. So, so then, you know, given, given, I think it was Dave's comments that, you know, you're kind of looking for low single-digit growth in Q3, does, does that trend kind of carry into Q4? Maybe not so much, you know, mortgage-driven to maybe more commercially driven.
David Antolik (President)
Yeah, I think that's accurate, Dan.
Christopher McComish (CEO)
Yeah, that's what we do. Dave talked about relative to the growth in the pipeline and what we're seeing. There's seasonality to it, and there's better activity, so it's...
Daniel Cardenas (Director and Equity Research Analyst)
Okay, great. All right. That's all I have right now. All my other questions have been asked and answered, so thank you, guys.
Christopher McComish (CEO)
Thank you.
David Antolik (President)
Thanks, Dan.
Operator (participant)
I would like to turn the call over to Chief Executive Officer, Chris McComish, for closing remarks.
Christopher McComish (CEO)
Okay. Well, again, to the group on the phone, great questions. Really appreciate the dialogue and your engagement with us. If you've got other follow-up, feel free to reach out. We're darn proud of this quarter and most importantly for me and Dave and Mark and everybody, it's the continued trends that we're seeing, the engagement level of our teams, the commitment that they have to our customers, all of that represents a lot of positivity for us, and we appreciate your interest in our company. So have a great rest of the day.
Operator (participant)
Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.