Earnings Call Transcript
CIVISTA BANCSHARES, INC. (CIVB)
Earnings Call Transcript - CIVB Q3 2020
Operator, Operator
Good day, and welcome to the Civista Bancshares, Inc. Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Dennis Shaffer. Please go ahead.
Dennis Shaffer, President and CEO
Good afternoon. This is Dennis Shaffer, President and CEO of Civista Bancshares, and I would like to thank you for joining us for our third quarter 2020 earnings call. I'm joined today by Rich Dutton, Senior Vice President of the company; and Chief Operating Officer of the Bank; and Chuck Parcher, Senior Vice President of the company and Chief Lending Officer of the bank; and other members of our executive team. Before we begin, I would like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Civista Bancshares, Inc. that involves risks and uncertainties. Various factors could cause actual results to be materially different from any future results 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. 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 available on our website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non-GAAP measures. We will record this call and make it available on Civista Bancshares website at civb.com. Again, welcome to Civista Bancshares third quarter 2020 earnings call. I would like to begin by discussing our results, which were issued this morning. At the conclusion of my remarks, we will take any questions that you may have. This morning, we reported earnings for the third quarter 2020 of $7.7 million, or $0.48 per diluted share and $22 million or $1.36 per diluted share for the nine-months ended September 30, 2020. This represents an increase in net income from 2019 of $136,000 for the quarter and a decrease of $3.5 million for the nine-month period. The COVID-19 pandemic has had several effects on our balance sheet and income statement during 2020. Our balance sheet has grown as a result of the Paycheck Protection Program, or PPP, the makeup of our income statement has shifted as well. The largest change on our income statement is an increase in provision for loan losses due to the economic uncertainty created by COVID-19, stay-at-home orders and increased unemployment. Without the increase in provision, our net income would have exceeded 2019 levels for both periods. Our strong capital position and continued ability to generate core earnings allowed our Board of Directors to once again approve our quarterly dividend of $0.11 per share earlier this month, which represents a dividend payout ratio of 23%. In addition, after meeting with customers and working through the second round of pandemic related loan modifications during the quarter, we began to gain some clarity of our customers' financial position and their ability to perform moving forward. This clarity along with our strong capital position allowed us to resume share repurchases. During the quarter, we repurchased 107,500 shares at an average price of $12.15 per share. We view share repurchases as an integral part of our capital management strategy. Our return on average assets was 1.08% for both the quarter and year-to-date, while our return on average equity was 9.01% for the quarter and 8.8% year-to-date. Despite the lower interest rate environment, net interest income for the quarter was $22 million, which was consistent with the linked quarter and $1.6 million greater than the prior year. Our net interest margin did contract to 3.44% compared to 3.61% for the linked quarter and 3.70% year-to-date. While the $259 million of PPP loans provided positive net interest income in dollars, they made up 12.7% of our average loans for the quarter and 7.8% year-to-date at an average yield that approximates 3%. They do have a negative impact on our margins. Without the PPP loans, our margins would improve by 40 basis points to 3.84% for the quarter and by 23 basis points to 3.93% year-to-date. During the quarter, non-interest income was fairly consistent with that of our second quarter at $6.8 million and increased $1.4 million or 25% over the same quarter in the prior year. During the first nine months, non-interest income increased $3.7 million or 22% over the prior year. The low interest rate environment continues to drive the mortgage markets across our footprint, and mortgage banking continued to be the largest driver of non-interest income. Third quarter gains on the sale of mortgage loans were $2.4 million, or 6.7% greater than the linked quarter and $1.6 million or 196.1% greater than the third quarter of the previous year. Similarly, the year-to-date gain on sale of mortgage loans was $5.5 million or 223.4% higher than the previous year. During the quarter, we sold $84.1 million in residential mortgage loans at an average premium of 286 basis points compared to $91.5 million in the linked quarter and $36 million in the prior year. Year-to-date, we have sold $211.1 million in mortgages compared to $80.5 million in the previous year year-to-date. Our mortgage pipeline remains very strong. Other significant drivers of non-interest income were interchange fees and wealth management fees. Swap fee income was down for the third quarter, but it's 339% higher year-to-date. Service charges have decreased compared to 2019 levels. We did see some rebound in service charges compared to the linked quarter with an increase of $484,000 or 52%. A $183,000 of the increase was due to reinstating several customer service charges that we suspended during the second quarter to provide relief to our deposit customers. Overdraft fees also increased $270,000 compared to the linked quarter. While non-interest expense increased both during the quarter and the nine-month period compared to 2019, we did see a decrease of 2.1% for the linked quarter. The year-over-year increase was primarily related to compensation expense, which centered on annual pay increases that go into effect each April, commissions attributable to the increased mortgage loan activity, and overtime associated with commercial loan modifications increased mortgage activity and our participation in the SBA PPP program. Our efficiency ratio was 60.7% compared to 61.7% for the linked quarter and 61.1% year-to-date. Excluding PPP loans, our loan portfolio increased $16.4 million during the third quarter and $72.9 million year-to-date. That equates to an annualized growth rate of 3.6% for the quarter and 5.7% year-to-date. That growth came in every commercial category. Our loan pipelines remain strong and we have $124.4 million in approved undrawn construction loans at September 30. In a normal year, we would probably be disappointed with our loan growth. However, considering the effects of the pandemic, we are pleased with the loan production across our footprint. As the pandemic continues, it is difficult to project how the larger economy and more specifically, our loan portfolio will grow in future quarters. However, we remain optimistic. With respect to PPP, we originated just over 2,300 loans for $259.1 million resulting in deferred fees of $9.9 million. The SBA recently provided guidelines for abbreviated forgiveness of PPP loans with balances less than $50,000. At September 30, we had 1,368 loans totaling $26.3 million that should qualify for the SBA's abbreviated forgiveness application. To date we have submitted 23 applications, totaling $8.1 million for forgiveness and have received proceeds from the SBA, paying off four of those loans. While this remains a more labor-intensive effort than we had hoped, we are confident in our approach and are proud of Civista's role in assisting our customers and communities as we continue to navigate this pandemic. In regards to COVID-19 loan modifications, as the CARES Act was rolled out, we took a very proactive approach to modifications, offering 90-day modifications on over 800, mostly commercial loans, totaling $431.3 million, which represented 26.5% of our commercial loan portfolio at June 30. Since that time we and our customers have gained a better understanding of the impact of the pandemic on their business. As a result, most have resumed making their contractual payments. At September 30, we had 47 loans, totaling $52.2 million or 2.9% of total loans remaining in deferred status. The largest concentration of these loans are $21.9 million in hotel, $11 million in healthcare, and $3.3 million in restaurant loans. We continue to experience low charge-off rates and delinquencies remained very, very low. While we and our customers have a much better understanding of the impact of the pandemic that will have on our businesses than we did coming into the quarter as part of our credit process, we automatically downgraded each of the loans that requested concessions beyond the initial 90-day modifications. This resulted in an increase in substandard loans of $4.7 million and special mentioned loans of $107.9 million during the quarter. Given the uncertainties associated with the COVID-19 and its impact on the economy, we continue to review and refine the qualitative factors in our allowance for our loan loss model. As a result, we recorded $2.25 million provision expense for the quarter and $7.9 million provision expense for the year. The ratio of our allowance for loan losses to loans increased to 1.11% from year-end, which was 0.86%. Exclusive of the PPP loans, this ratio would have been 1.27%. Our allowance for loan losses to non-performing loans also increased to 292.88% at the end of the first quarter from 161.95% at the end of 2019. While these reflect very strong credit metrics by historical standards, given the uncertain nature of our current economy, we will continue to monitor our portfolio and the economy making further adjustments as our model dictates. As a reminder, we did meet the guidelines for the delayed implementation of CECL and will not be required to adopt it until 2023. On the funding side, our deposits increased $390 million or 23.2% since the beginning of the year. While we have seen increases in every deposit category, the most significant increases came in our business checking accounts where the proceeds from the PPP loans were deposited. In addition, over $108.9 million of our year-to-date deposit growth came in personal checking and savings accounts. The increase in deposits allowed us to reduce our reliance on FHLB advances by $101.5 million or 44.8% since December 31. In addition, we borrowed $183.7 million from the PPP liquidity facility to assist with funding the PPP loans originated during the second quarter. These borrowings carry a low rate of 35 basis points and also provide for advantageous regulatory capital treatment of the PPP loans. In spite of the challenges of the current environment, we are pleased with another quarter fueled by solid core earnings. Throughout today's comments, I hope I have conveyed how proud I am of the great team we have here at Civista and the quality customers that have chosen to work with us. We couldn't have one without the other. Our people have accomplished much through the first three quarters of 2020. Despite the pandemic, we reported earnings per share for the third quarter of 2020 that exceeded earnings in the same period of 2019. While the next several months will continue to test the banking industry and the larger business world, I am confident that Civista is well-positioned with a solid balance sheet, strong capital levels, and a diverse revenue stream to meet the challenges that lie ahead. Thank you for your attention this afternoon. And now we will be happy to address any questions that you may have.
Operator, Operator
We'll now begin the question-and-answer session. Our first question comes from Terry McEvoy from Stephens. Please go ahead.
Terry McEvoy, Analyst
Hi, good afternoon.
Dennis Shaffer, President and CEO
Hi, Terry.
Terry McEvoy, Analyst
First question I have on the loan modification, the $52 million which are down nicely, are those loans still in round one, or is there a segment that has moved into what I'll call around two?
Paul Stark, Chief Operating Officer
The majority of the $43 million are still in round two, and about eight of them will run out here in October.
Dennis Shaffer, President and CEO
And Terry, most of the $259 million in round one were 90-day extensions.
Terry McEvoy, Analyst
Great. And then as a follow-up question, the 3.84% core net interest margin, what are your thoughts on the fourth quarter and heading into next year, just as you faced this low rate environment and potentially some pressure on your asset yields?
Rich Dutton, Chief Operating Officer
Terry, this is Rich. As we mentioned last quarter, the majority of the compression we anticipated over the coming quarters occurred in the second quarter, though we may still experience some contraction. The margin for the second quarter was 3.61%, and for the third quarter, it was 3.44%. However, if we exclude the effects of the PPP loans and their associated yield, the second quarter's margin would have risen by 22 basis points, and the third quarter's margin would have increased by 40 basis points. In simpler terms, our normalized yield for the second quarter was 3.83%, and for the third quarter, it was 3.84%, indicating a slight expansion of one basis point. This was somewhat unexpected, but as we stated in the last call, we anticipated some basis points of compression. Our loan team has been performing exceptionally well, consistently working to maintain our rates.
Dennis Shaffer, President and CEO
Yes, Terry, as Rich mentioned, we did experience some compression in the second quarter. It's important to note that the rate reduction occurred in March. Moving forward, this compression may become a bit narrower. However, we could still see some compression as we approach the fourth quarter and into the first quarter. The lending environment remains competitive. Although we have widened spreads, it is still a tough market, and we are focused on protecting our margins while also seeking growth. We are trying to strike a balance between these two objectives.
Terry McEvoy, Analyst
That sounds great. Thanks for taking my questions.
Rich Dutton, Chief Operating Officer
You bet.
Dennis Shaffer, President and CEO
Thanks.
Operator, Operator
Next question comes from Michael Schiavone from KBW. Please go ahead.
Michael Schiavone, Analyst
Hi, good afternoon.
Dennis Shaffer, President and CEO
Hi, Michael.
Michael Schiavone, Analyst
Can you discuss the markets you see as strong and where you identify opportunities for loan growth, as well as how the pipelines are looking?
Chuck Parcher, Chief Lending Officer
I can tell you, Michael, this is Chuck. The pipeline for the fourth quarter this year is $55 million higher compared to the same quarter last year. We feel optimistic about our position heading into the fourth quarter. In Dennis's comments, he mentioned that we have about $124 million of unfunded construction ready to be drawn over the fourth quarter and the first quarter of next year. We believe we are well-positioned. The Metro markets have been very strong, and Columbus has hardly missed a beat from a development perspective since COVID. We have some promising projects in the Cleveland, Dayton, and Cincinnati areas, and we have also seen loan growth in some of our rural areas. We are getting contributions from all regions and feel great about our direction in the fourth quarter, unless we encounter significant setbacks from COVID.
Dennis Shaffer, President and CEO
Michael, I believe we are effectively engaging with the right people in the appropriate markets. We have many long-standing relationships with our lenders. In various markets, our team comprises experienced banking professionals who have navigated these relationships through numerous economic downturns. Some of our team members have been working with certain clients for over 30 years. We are managing well, and although we have moved away from high-risk industries such as hotels, healthcare facilities, and restaurants, we anticipate positive loan growth. This is largely due to the enduring relationships that our lenders maintain with clients in our service areas.
Rich Dutton, Chief Operating Officer
And quite frankly, Michael, the other thing that we've got a little bit of advantage of right now is with the CMBS market slowing down, some of our larger projects that we would have thought that would have went to the permanent market by now have stuck on the balance sheet, that has helped from a balance perspective as well.
Michael Schiavone, Analyst
Okay. Thanks for that color. And on fee income, year-over-year growth has been quite strong. Can you just talk about how sustainable the fee income run rate is?
Dennis Shaffer, President and CEO
Well, I think, for the near term and at least the early part of next year, the mortgage banking piece is going to stay relatively strong. Those pipelines are pretty full. We've had pretty good swap income for the year, up substantially. We've widened spreads there and that slowed that activity a little bit down in the third quarter. But if the CMBS markets are not active, I do think that we can continue to do some good volume on the swap income side. And some of our service charge income it was down in the second quarter because we had kind of suspended some of that, that's back. And I think interchange activity may be up some just because people are using their debit cards and things like that more. So, I think it's sustainable. We've really had a focused effort on trying to increase that non-interest income over the last three or four years. And we really built that up nicely. And we're going to continue to invest in those areas so that we can continue to kind of diversify our revenue stream.
Michael Schiavone, Analyst
Okay. And just one last one. Many of your peers have announced plans for a branch or office cost savings plan. Has the Board reviewed anything like that within the footprint to consider a similar cost initiative?
Dennis Shaffer, President and CEO
We are closely examining our expenses as we approach next year, especially in this prolonged low interest rate environment. It is important for us to ensure we operate as efficiently as possible. We are actively reviewing various expense items and believe we can achieve some reductions. However, a portion of the savings will be reinvested into the company, mainly for technology enhancements. We have recently entered a contract to upgrade our digital banking platform, which will improve our digital services for both commercial and retail customers. Therefore, while we expect to see some expense reductions, a part of those savings will be reinvested back into the company.
Michael Schiavone, Analyst
Okay. Great. Thanks for taking my questions. Have a good weekend.
Dennis Shaffer, President and CEO
Okay. Thank you.
Operator, Operator
Our next question comes from Nick Cucharale from Piper Sandler. Please go ahead.
Nick Cucharale, Analyst
Good afternoon, guys. How are you?
Dennis Shaffer, President and CEO
Hey, Nick.
Rich Dutton, Chief Operating Officer
Hi, Nick.
Nick Cucharale, Analyst
Just to piggyback off the loan commentary, can you give us a sense for the competitive dynamics in your market? Has the competition increased with the modifications coming down across the industry?
Chuck Parcher, Chief Lending Officer
It has increased. This is Chuck again, Nick. I can tell you that we’ve likely walked away from many more deals than in past years, which is frustrating. We are really trying to maintain our margins as much as we can. When we reach certain rates on specific transactions, particularly if we aren't receiving any other ancillary income or fee income from them, we are letting more deals go than we ever have. However, we feel optimistic about where our pipeline stands right now. We are confident about the fourth quarter, although projecting beyond that will be challenging until we see how COVID impacts growth. But I do feel positive about our outlook for the fourth quarter.
Dennis Shaffer, President and CEO
And Nick, as I mentioned, we've exited some of those high-risk industries, and most of our competition has done the same. Therefore, we are all competing for a smaller pool of deals, which intensifies the competition.
Chuck Parcher, Chief Lending Officer
And from a marketplace perspective, I would tell you, Columbus seems to be the most competitive right now. We've had a lot of different competitors move into that marketplace over the last three to four years. I think people are still trying to inch out some loan growth to make those investments pay off. So, we're seeing a really, really competitive rate environment down there. And then, we're also seeing often the Metro market, but that seems to be the one market where it seems very frothy from a rate perspective.
Nick Cucharale, Analyst
Okay. And then just to follow-up on the improvement in deferrals. It was helpful that you broke out the loan types in the release, but were any of the remaining modifications disproportionately represented in the especially affected industries you've run through in the past? Or are they pretty dispersed?
Paul Stark, Chief Operating Officer
This is Paul. It’s pretty dispersed. Obviously, we talked about hotels. It was probably the biggest portion of it. And then it's pretty distributed there a couple of restaurants. But it’s significantly lower than it was the first round and a lot of that going on.
Nick Cucharale, Analyst
Yeah. Nice job there. It looks like the expenses came in a little bit better than expected. Rich, can you share with us your outlook on the expense front in the near term?
Rich Dutton, Chief Operating Officer
I mean, I guess, there are things going up and things going down, Nick. I mean, the COVID expenses are a big piece, although I think they did kind of curtail during the quarter. I think Nick, you were right at about a $100,000 of COVID-related expenses, but certainly the travel and education and some of those expenses are down too. I think if you were looking for a run rate going forward and I'd hate to project much past the end of the year, but I think what we did in the third quarter is a decent proxy for what we'll do in the fourth quarter.
Nick Cucharale, Analyst
Okay. That's helpful. And then just lastly with your total capital ratio at nearly 16%, you continue to have strong internal capital generation despite the reserve build. Can you help us think about your capital priorities and your thoughts on continuing to utilize the buyback?
Dennis Shaffer, President and CEO
I believe that using buybacks is a great strategy right now, especially since we're trading below book value. The shares we're repurchasing are very beneficial for us. Given our current comfort level with our loan portfolio, this activity will likely persist. We're quite confident in this approach. With not much M&A activity occurring right now, it seems to be the best option for deploying capital.
Nick Cucharale, Analyst
Great. Thank you for taking the questions.
Dennis Shaffer, President and CEO
Thank you.
Operator, Operator
Our next question comes from Russell Gunther with D.A. Davidson. Please go ahead.
Russell Gunther, Analyst
Going back to the NIM.
Dennis Shaffer, President and CEO
Start again.
Russell Gunther, Analyst
Going back to the NIM discussion on the funding cost side, I was wondering if there were any levers to bring that down further, or it will be difficult to bring it down below to 50 to 60 basis point range?
Rich Dutton, Chief Operating Officer
Hey, Russell. This is Rich. And we say every quarter that it's going to be hard to do it. And it seems like every quarter we squeeze out another basis point or two, but the really only significant lever we've got left to pull is on the CD, the time deposit side. We don't have a ton of time deposits. But certainly, those are things that we've repriced late, maybe in the third quarter. So, we might see a little bit there. But to your point, it's going to be hard to reduce funding near-term cost.
Russell Gunther, Analyst
Okay. And then on the investment security side, do you anticipate the yield on those remaining relatively stable going forward, or any type of lag compression there?
Dennis Shaffer, President and CEO
I think again, what we saw earlier in the year is probably what we're going to see. I mean, we've got it fairly well laddered out and not a whole lot roll it on and off. We probably moved maybe more in a taxable munis than non-taxable munis, but the yields have kind of held there. So, again, I don't think we're going to see much compression due to reducing the yield on our investment portfolio, again near term in the next several quarters.
Russell Gunther, Analyst
Got it. And then just one last question on the deferrals. I was just wondering if you're able to share an updated trajectory down into the fourth quarter from the 3% today.
Paul Stark, Chief Operating Officer
It's really difficult to say. There's no doubt we've seen the migration of credits stabilize and return to payments. As we move into winter, particularly with seasonal businesses, I think we'll observe some additional changes. However, I don’t anticipate a significant increase. We've been fortunate with the strength of our borrowers in our portfolio, and honestly, we have not experienced any defaults or bankruptcies thus far. Our consumer portfolio is performing very well, with only about five deferrals in the entire book. So, hopefully, we'll keep experiencing this luck and continue our efforts, but I don't expect a large spike or anything similar.
Dennis Shaffer, President and CEO
Yeah. The unpredictable factor is the stimulus. There’s a possibility of another stimulus round, particularly aimed at high-risk industries. If that happens, there might be a chance for those numbers to decrease further. If it doesn’t happen, that leaves us with uncertainty brought about by the pandemic. Predicting is difficult, but we are pleased to have reduced those numbers from our initial levels. We believed we were quite proactive. For anyone who indicated they were affected, we provided an initial 90-day extension, coinciding with the timing of the PPP. We are satisfied with our current status regarding deferrals.
Russell Gunther, Analyst
Got it. Thank you for taking my questions.
Dennis Shaffer, President and CEO
Thank you.
Paul Stark, Chief Operating Officer
Thank you.
Operator, Operator
Our next question comes from Joe Plevelich with Boenning & Scattergood. Please go ahead.
Joe Plevelich, Analyst
Good afternoon.
Dennis Shaffer, President and CEO
Hi, Joe.
Joe Plevelich, Analyst
Hey guys. Just a quick question. You mentioned that you implemented automatic downgrades for any modifications that lasted more than 90 days. Can you go over some of those figures again? Also, what kind of additional downgrades might we anticipate in the upcoming quarters?
Paul Stark, Chief Operating Officer
Dennis mentioned that we conducted the first deferral without extensive analysis. During the second round, we gathered more information because historical data was not particularly relevant due to the shutdowns. We assessed whether a second deferral was necessary, and the number significantly decreased—from 723 in the first round to just over 100 in the second. Based on this, we might consider downgrading it again if their cash flow projections suggest they're returning to a positive trajectory. We're aiming to integrate these assessments with our standard risk rating process. We anticipate ongoing changes and are closely monitoring each credit individually. At this point, as mentioned earlier, it's uncertain where things will head, but it appears that the group needing attention is shrinking as we move forward.
Dennis Shaffer, President and CEO
Yes, Joe, at this point we feel quite confident that there is no risk of loss from our current perspective. Paul has mentioned in our management meetings that there is an increased risk of default and loss. However, we believe we are well-secured with many of those loans, as we have strong sponsors supporting them. They are certainly affected by COVID and the pandemic. Currently, we think it is appropriate to recognize this increased risk during the pandemic compared to six or twelve months ago, definitely compared to a year ago. Therefore, we believe it is sensible to downgrade our assessment, acknowledge the situation, and monitor it closely. From our viewpoint, we currently see a higher risk of default and loss.
Joe Plevelich, Analyst
Thanks. And then, do you have a specific number of criticized and classified? Is it 9/30 versus 6/30?
Paul Stark, Chief Operating Officer
Yes, we did see an increase. Most of the increase can be attributed to Dennis's comments. As of June 30, before the second deferral round, we had about $15 million, and by September 30, that amount rose to $117 million. Nearly all of that increase was based on the new information we gathered, and in our opinion, the loss given default is significant.
Rich Dutton, Chief Operating Officer
This is Rich. Most of those were likely automatic downgrades. We're discussing special mentions here. If you're going to have criticized assets, those are the best kind.
Joe Plevelich, Analyst
Thanks, guys.
Operator, Operator
Our next question comes from Kevin Swanson with Hovde Group. Please go ahead.
Kevin Swanson, Analyst
Good afternoon.
Dennis Shaffer, President and CEO
Hi, Kevin.
Rich Dutton, Chief Operating Officer
Hi, Kevin.
Kevin Swanson, Analyst
I'm sorry to keep bringing up the deferral numbers, but I'm curious about your view on lifetime values, assuming the values are set at the origination date. Could you elaborate on how cash flow disruptions have affected some valuations, particularly in the hotel portfolio? Also, is there anything noteworthy you're observing in the marketplace that might update the value of those properties?
Paul Stark, Chief Operating Officer
This is Paul. If there's a long-term disruption in income, it will impact value. Currently, most appraisers view this as a temporary disruption, and we're not observing a significant decline in values based on the data from the past six months. However, this could change over time. We're not ordering new appraisals yet, so it's challenging to assess. Overall, our hotel portfolio is at a relatively low level, around 58%.
Dennis Shaffer, President and CEO
I think that's a little low, okay.
Paul Stark, Chief Operating Officer
That's where I think we stand right now. So, I think we're in pretty good shape. The other category of loans that faced stress early on was retail-related commercial real estate properties. Many of the tenants had requested deferrals, but most of those are returning to payment structures, and most of them have gone back to making full payments. Tenants are now paying.
Dennis Shaffer, President and CEO
Kevin, I would say that for the new deals we are recording, appraisals are coming in quite stable. The values are holding up, unlike what we experienced in the last recession when we saw significant drops in real estate values. We haven't encountered that with the new deals we are engaging in. Our commercial customers are selling properties and achieving the prices they aimed for, so we haven’t observed that large decline like we did during the last recession. Additionally, the housing market is performing robustly now, which is a stark contrast to the previous recession when real estate values plummeted. In my opinion, this is one of the most significant differences between the current COVID-induced recession and the last one.
Chuck Parcher, Chief Lending Officer
This is Chuck. We are closely monitoring the cap rates, which have not changed significantly. In fact, I believe this is partly due to the decline in interest rates over the past six months. Property values are stable, and the PPP program has been beneficial for retail investments. As Paul mentioned earlier, we had some tenants who requested rent forbearance from our landlords and borrowers, but once the PPP funds were disbursed, they were able to use that for rent. This assistance was significant, and currently, we have very few property owners dealing with rent deferrals.
Kevin Swanson, Analyst
Okay. Thanks. That's all really helpful. And then just finally for me. Could you maybe update us on in terms of PPP and new clients gained through that, any kind of traction you've had on that end?
Chuck Parcher, Chief Lending Officer
We are tracking a few initiatives and currently have a little over 300 new opportunities through the PPP program. I don't have a specific dollar figure at the moment, as we are still evaluating that. However, I can confirm that the impact has been substantial, particularly on the deposit side. We are slightly slower in terms of lending, but we are optimistic about the new opportunities we have, most of which will come from major regional or national banks as they seek to re-enter community banking.
Dennis Shaffer, President and CEO
Anything else, Kevin?
Kevin Swanson, Analyst
No. That's it. Thanks.
Dennis Shaffer, President and CEO
Thank you.
Chuck Parcher, Chief Lending Officer
Thank you, Kevin.
Operator, Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Dennis Shaffer for any closing remarks.
Dennis Shaffer, President and CEO
Thank you. In closing, I just want to thank everyone for listening and thank those that participated in the call. Again, we are extremely pleased given this pandemic with our third quarter results. The balance of 2020 will continue to be a challenge. But we look forward to meeting that challenge and to talking to you again in a few months to share our year-end results. So, thank you for your time today.
Operator, Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.