Q4 2023 S&T Bancorp Inc Earnings Call
Okay.
Welcome to the <unk> Bancorp fourth quarter 2023 conference call. After management's remarks, there will be a question and answer session now I would like to turn the call over to Chief Financial Officer March Cooks Bar. Please go ahead.
Thank you very much and good afternoon, everyone. Thank you for participating in todays earnings call.
Before beginning the presentation I want to take time to refer you to our statement about forward looking statements and risk factors. The 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 fourth quarter and full year 2023 earnings release as well as the earnings supplement slide deck can be obtained by clicking on the materials button in the lower right section.
Of your screen.
We'll 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 S. T Bancorp Dot com.
With me today are Chris <unk>, <unk>, CEO, and David Antolik, S&P's President I'd now like to turn the program over to Chris Chris Martin. Thank you and good afternoon, everyone. I certainly appreciate the analysts being here with us on the call and we look forward to our quote to your questions.
I also want to take a minute to thank our employees shareholders customers that are also listening to the call to our leadership team and employees your commitment and engagement is what drives these financial results from these.
Chris Martin: These results are yours, and you should be very very proud of the.
Chris Martin: Beyond 2023 was at a historic year for <unk> in many ways as for the second year in a row, we produced record net income and earnings per share.
Chris Martin: We're a company that is almost 122 years old we certainly feel very good about these results.
Chris Martin: Before we get into the numbers I also wonder express how good I feel about the progress.
Chris Martin: We've made centered on <unk> people forward purpose and guided by the values that define who we aspire to be as a company. This purpose and these values connected to our core drivers of performance the health of our deposit franchise and growth of our deposit franchise solid credit quality.
Chris Martin: And best in class core profitability.
Chris Martin: Where we are focused to deliver for our shareholders not just in any one quarter or year, but over the long term.
All right I'm going to begin.
Chris Martin: Our remarks on the numbers on page three and in the fourth quarter ended <unk>.
Chris Martin: According to <unk> three inventory three we saw great progress on all of our drivers of performance.
Chris Martin: For the year net income was just under $144 million with an EPS again, a record EPS of $3 74 sets.
We achieved excellent return metrics within our OTC above 17, and profitability metrics, including our top tier PNR inefficiency.
Chris Martin: $2, one, 2% and 51% respectively.
Chris Martin: Our net interest margin remained above 4% for the year and we delivered an excellent efficiency ratio as I said up just over 51%.
Chris Martin: Turning to page four and for the quarter.
Chris Martin: We made 96 cents, a share or $37 million, which was up nine cents from Q3.
Chris Martin: And up more than 10% on a linked quarter basis.
Chris Martin: Our return metrics were again excellent with a 17% our OTC, while our <unk> remained relatively flat.
Chris Martin: Got it at a very strong 197% for Q3.
Chris Martin: Our NIM did see some contraction.
Chris Martin: However, our net interest income remained above $85 million for the quarter and Mark is going to provide some additional color here.
Mark Kochvar: Net charge offs of 19 basis points were flat, while our efficiency ratio did rise, but still remains quite strong.
Mark Kochvar: Moving to page five.
Mark Kochvar: We saw solid loan growth of over 7% annualized with both our commercial and consumer lines of business contributing on.
Mark Kochvar: On the deposit side, our customer deposit growth of just under $100 million.
Produced five 5% gross annualized which is a number we feel very good about in the quarter.
Mark Kochvar: While the mix shift continued we do see a slowing rate of decline in DDA balances. While also the stable stabilization of the NIM during the quarter market is going again.
Mark Kochvar: A lot more details on that.
Next I'm going to turn it over to Dave to talk a little bit more about the loan book and certainly about credit quality.
Dave: And then Mark will come in and talk about the income statement and capital further I also look forward to your questions. Following their remarks, Dave over to you. Thank.
Dave Smith: Thank you, Chris and good afternoon, everyone. Further reviewing our balance sheet, we saw loans increased by $137 million or seven 5%. During Q4. This growth was driven by commercial real estate and residential mortgage activities that growth and our CRE book was primarily a result of increased multifamily Ann.
Dave Smith: Storage facility balances that we continue to experience declines in our hotel office and healthcare balances as we manage through the changing economic landscape that has impacted these segments. We are confident that the progress we've made in management and managing segment exposure and our overall approach to portfolio management will serve us well in future.
Dave Smith: Orders in our C&I book, we didn't experienced meaningful changes in any of our key performance indicators are relative to utilization or collateral advance rates with the exception of our floor plan utilization, which increased from 43% to 52% and resulted in balanced growth of around 21.
Dave Smith: A continuing theme in our commercial book has reduced demand for an exposure to construction related borrowings in both CRE and C&I book's Conversely in our residential mortgage book, we continue to see demand for our construction related products as well as purchase activity.
Dave Smith: On our current pipelines and some adjustments to our residential mortgage strategy to further enhance and support our deposit franchise. We anticipate total annualized growth our loan growth of low to mid single digits for 2024, I'd also mentioned that.
Dave Smith: As in the past years, we would expect there to be some seasonality in this growth with the majority of that growth coming in the back half of the year also that growth will be focused on commercial and small business lending turning to asset quality on the next page our ACL remained relatively stable at 141% of gross loan.
Dave Smith: Loans, reflecting some moderate improvement in the ratings stack and accommodating loan growth that we saw in the quarter net charges were $3 $6 million or one 9% annualized and NPA has increased $6 6 million to $23 million and remain at what we believe is a very manageable 30 basis.
Dave Smith: At year end now.
Now I'll turn the call over to Mark.
Mark: Great. Thanks, Dave we're now on slide seven net interest income before rates started moving higher back in the fourth quarter of 'twenty. One our quarterly net interest income was about $68 4 million in the margin stood at $3. One 2%. While there has been and will continue to see some pressure on funding costs, our asset sensitive balance sheet has provided significant revenue improvement.
Mark Kochvar: Over the past eight quarters and the fourth quarter of 2023. The net interest margin remained 80 basis points higher and we are generating a 24, 4% or $16 7 million of additional revenue per quarter compared to the beginning of this rate cycle.
Dave Smith: The fourth quarter, then its margin rate of 392% is down 17 basis points from the third quarter as earning asset yield improvement of seven basis points did not keep pace with 33 basis points increase in costing liabilities.
Dave Smith: Cost of total deposits, including DDA DDA increased by 38 basis points to 176%, bringing the cycle to date data to 31% we.
Dave Smith: We did shift about $200 million of wholesale borrowings to broker deposits. While these were at about the same cost and it had no impact on the net interest margin. It did account for about 10 basis points of the 38 basis point increase in the total deposit cost.
Dave Smith: Our deposit mix remains much improved compared to the end of the last rates up cycle in 2019, when we had just 24% of deposits in DDA compared to just under 30% today.
Dave Smith: Customers continue to seek higher rates, but the pace has moderated we expect funding cost pressure continue in the first half of the year with a net interest margin bottoming out in the $3 70 range by mid year.
Dave Smith: We saw a more stable monthly net interest margins in the fourth quarter. All three individual months were fairly consistent in the low 390, the first quarter of 2024, though will be challenging from a funding cost perspective, as we along with many other competitors have a higher than normal amount of repricing CD.
Dave Smith: Next non interest income we saw an increase of $5 9 million in the fourth quarter compared to the third most of the variances in the other category the largest impact was from $80 $3 million Oreo gain.
Dave Smith: We also benefited from favorable noncash valuation adjustment of $2 2 million a little over half of this is due to the transition from LIBOR to sofa and its impact on our back to back customer swap program. We had a negative adjustment in the third quarter of 850000, and a positive adjustment in Q4 of about $300000, resulting in a quarter over quarter.
Dave Smith: <unk> variance of about $1 1 million.
Dave Smith: The remainder of the valuation adjustment is related to changes in the value of the deferred benefit plan, which is accounted for an additional million dollars of the favorable variance.
Dave Smith: That is offset as higher expenses and is P&L neutral.
Dave Smith: Remaining fee category line items are fairly consistent quarter over quarter, our recurring fee outlook going into 2020 for approximately $13 million per quarter.
Dave Smith: Next slide is expenses, which were somewhat elevated fourth quarter up $3 5 million compared to the third quarter. The increase in expenses came primarily in salaries and benefits.
Dave Smith: We do operate a self funded medical plan and saw expenses in the fourth quarter about $1 million higher than in the third quarter. While some of that is seasonal due to the timing of participants reaching their deductibles, we did experienced unusually higher claim activity.
Dave Smith: Incentives were also higher by about 800000 to better full year performance than expected given strong earnings and activity levels in the fourth quarter.
Dave Smith: And finally, the offset of the change in the value of deferred benefit plan I mentioned and fees accounted for another $1 million of the increase.
Dave Smith: After all that we expect expenses to normalize in the first quarter of 2004 as these three items arent likely to repeat at nearly the same level, leaving us with a run rate and a 53% to $54 million per quarter range.
Dave Smith: Next slide is capital the TCE ratio increased by 57 basis points. This quarter about 37 basis points of that increase was due to lower OCI.
Dave Smith: <unk> remained quite strong due to good earnings in a relatively small securities portfolio all of our securities are classified as ASF.
Dave Smith: Our capital levels position us well for the environment and will enable us to take advantage of organic or inorganic growth opportunities that may come our way.
Dave Smith: And lastly, the board of directors authorized a new share repurchase program of $50 million well cost will be cautiously look for opportunities for repurchases, depending on the economic conditions, our financial performance and outlook and the price of our stock.
Dave Smith: Thank you very much at this time I would like to turn the call back over to the operator to provide instructions for asking questions.
Dave Smith: Yes.
Dave Smith: The floor is now open for questions. If you have any questions. Please press star one on your phone and we asked a while asking your question. Please pick up your phone and turn off speaker phone for enhanced audio quality. Please hold while we poll for questions.
Your first question comes from the line of Daniel Tamayo from Raymond James Your line is open.
Dave Smith: Good afternoon, guys. Thanks for taking my questions.
Dave Smith: Hi, Dan.
Daniel Tamayo: Maybe we start just on on the NIM and NII outlook.
Daniel Tamayo: So I appreciate the color you gave on.
Dan: The NIM expected to bottom in the $3 70 range mid years.
Dan: What is the right outlook or the rate cut outlook that you have baked into that and then just curious how you expect the margin to react to each 25 basis point rate cut.
Mark Kochvar: Yes, so in our in our faithful question in that we don't have a lot of impact.
Mark Kochvar: From that decreases.
Mark Kochvar: That will increase us negatively we still have some exposure to the front ended the curve.
Mark Kochvar: We were as we look at it.
Mark Kochvar: Every 100 basis points on an annualized basis.
Mark Kochvar: It will impact our net net.
Mark Kochvar: Net interest income by about four to four 5%.
Mark Kochvar: So sorry, if I don't have the headset 25 basis point impact, but depending on the pace and the timing of the fed increase we do have some sensitivity to rate down that 370 outlook mid year is three any fed increases just due to the uncertainty.
Mark Kochvar: That we see with that.
Mark Kochvar: The progression there.
Mark Kochvar: Okay.
Mark Kochvar: 100 basis point impact is that.
Mark Kochvar: Kind of.
Mark Kochvar: Uh huh.
Mark Kochvar: An immediate impact or a gradual or what's baked into that assumption.
Mark Kochvar: And that would be like an immediate but annualized. So for example, if you go by that.
Mark Kochvar: In the recent past and would take us down 125 basis points that would average for the year like 55 basis points. So we would expect about half of that four 5% impact on margin for the our net income for the calendar year.
Mark Kochvar: Okay.
Dave Smith: I'm, sorry to keep digging here, but just curious I mean is.
Dave Smith: Some of the.
Dave Smith: The regulatory disclosures don't account for.
Dave Smith: What you might do in that actual situation were to occur or is that is that something you think is realistic or would you be.
Dave Smith: Managing the balance sheet differently in that scenario.
Dave Smith: What do you mean by regulatory disclosures.
Dave Smith: Just a sensitivity disclosures that are in <unk>.
Dave Smith: Our regulatory filings that gave a 100 basis points.
Down scenarios.
Dave Smith: I mean, the assumptions I'm, giving you is our goal would be kind of reflective of.
Dave Smith: Of those of those we do.
I mean, the actual outcome is going to be dependent on how well we are able to pass those.
Dave Smith: Rate declines onto our onto our customers in the form of interest interest expense.
Dave Smith: We have assumptions built in and how we'll be able to do that and Thats. Those are also built in with data in the in that sensitivity analysis.
Dave Smith: Again, it depends on how well we perform against those assumption I'm not sure if im getting at your question.
Dave Smith: Yes.
Dave Smith: I think it's a good answer I appreciate it.
Dave Smith: Secondly, just on the on the on the asset side. So I appreciate that.
Dave Smith: Low single low to mid single digit loan growth forecast are you assuming the.
Dave Smith: Securities essentially bottomed or youre going to be growing that that portfolio with loan growth from here on out.
Dave Smith: It'll be it'll be modest.
David G. Antolik: As David mentioned, our loan growth assumptions are pretty low. So we would expect not a lot of change on the securities the size of the Securities book.
David G. Antolik: Okay great.
David G. Antolik: I guess lastly, just.
David G. Antolik: On the buyback that you established the $50 million.
David G. Antolik: I appreciate the color there but.
David G. Antolik: Maybe if you have any thoughts.
David G. Antolik: What would what youre thinking about in terms of using that what would drive.
David G. Antolik: Utilization, Peter on normalized or or.
Peter: Greater use of that.
Peter: Within the $50 million.
Peter: Yes.
Peter: Our preference.
Peter: For using capital we think we're in a good position when we have a we think we have a very robust capital capital.
Peter: To work from.
Speaker Change: Our preferences for organic and inorganic.
Speaker Change: Backs would be our realized third choice when it comes to that but we look for kind of price action that we don't think is warranted over the long term so net debt.
Speaker Change: The significant recession that caused oil prices go down we would probably be cautious about buybacks given the need for potential capital.
Speaker Change: Protect the protect equity given our higher loss scenario, but short of that if we thought it was just the market dislocation that will be a place where we would we would probably jump in and look at the opportunities to repurchase.
Speaker Change: Understood Alright, Thank you for all the color that's it for me.
Speaker Change: Our.
Speaker Change: Question comes from the line of Michael Perito from key BW. Your line is open.
Speaker Change: Yes.
Speaker Change: Hey, guys. Good afternoon, Thanks for taking my questions sure thing Mike.
Michael Perito: Just a couple of clarification comments around questions rather around some of the guidance commentary on the loan growth.
Michael Perito: You provided a little context I wonder if you can just taken a layer deeper the low single digits is that.
Michael Perito: Pipeline competitive response kind of.
Mike: Just taking into consideration the increased funding costs. All three just kind of how do you guys get to that level based on what youre seeing today, yes, primarily pipelines at this point and we're also looking at where we want to participate in the residential mortgage space and making sure that it complements our desire to.
Mike: Enhance the deposit franchise. So we're looking hard at those activities to make sure that they make sense and that they are profitable and thats not just growth for the sake of growth.
Mike: Our focus is really going to be on commercial small business growth and we've got the teams in place. We've got pipelines that are building. So I feel pretty confident that we can get there.
Mike: As <unk> seen historically, our growth tends to come in the back half of the year and Thats, where the commercial activity generally comes from.
Mike: There is some real seasonality to the way we've been analyzed.
Chris Martin: The growth in our balance sheet and typically the first quarters.
Chris Martin: A little bit slower than the remaining quarters, and we see good activity and good opportunities in the marketplace, but we certainly don't want to guide to something.
Unreasonable relative to the growth rates in the economy and what we're seeing in the in the general marketplace, So that kind of lower lower part of the.
Chris Martin: The mid cycle mid side of.
Chris Martin: Low growth makes it makes a lot of sense, we feel really good about the past quarter and the growth that we've had in the past couple of quarters.
And that's.
Chris Martin: That's the range that makes a lot of sense right now.
Chris Martin: Got it helpful and then on the deposit cost side and NIM bottoming out in the mid point of the year.
Chris Martin: How far along I mean, how much is that like on the edges like trying to grow deposits or or.
Chris Martin: First is kind of legacy customers that are still coming to you guys and looking to reprice higher on things like where are you guys kind of at in that cycle.
Chris Martin: Yes.
Chris Martin: I would say that if you look through the year of 2023, Mike.
Chris Martin: Fed funds got to the fore handle is where in the.
The competitive intensity for rates in the marketplace really picked up.
Chris Martin: And that was significant.
Chris Martin: All the way all the way through.
Chris Martin: The third quarter, we we took the approach of being.
Chris Martin: Proactively working very closely with our customers to retain and grow deposits as they may have made sense, we built a very efficient pricing process to be to be able to be.
Chris Martin: To be beneficial to our customers while at the same time everything we could do.
To manage the margin we feel we feel very good about that performance and we're seeing it in our.
Chris Martin: Customer experience surveys.
Chris Martin: How we managed through that we will continue to stay focus on customer retention and as well as expansion of wallet within our customer base.
Chris Martin: As well as new customers out there.
Chris Martin: Yes.
Chris Martin: The deposit intensity is still there I would say, it's a notch lower than it may have been.
Chris Martin: Earlier in the year that $100 million worth of customer deposit growth.
Chris Martin: That's the best quarter, we've had in a while and it's representative of a couple of things one just day to day everyday outreach, but to some of the work we've been doing.
Chris Martin: Particularly in the commercial business around development of some treasury products Treasury management products and capabilities.
Chris Martin: Distribution networks.
Chris Martin: <unk> increased a lot of activity.
Chris Martin: Great and then just lastly for me you guys.
Chris Martin: Even sure.
Chris Martin: So tougher market performance today for the Bank group Aside I mean, do you guys still have a pretty decent relative currency here any updated thoughts Chris on where the M&A market kind of stance here I mean, it feels like we're close to maybe turning the page a little bit and at least <unk>.
Chris Martin: <unk> kind of activity would love to hear what you say.
Chris Martin: Yes.
Chris Martin: But I would characterize that youre using a little bit different words than I would the way I've described it as people seem to be talking about talking about it.
Chris Martin: They're earlier in the year they were talking about it.
Chris Martin: And so yes, we absolutely expect to and desire to participate in consolidation and leave that those opportunities.
Mark Kochvar: It's the work we've done Mark talked a little bit of the expense growth that we've had in a lot of that's been built on adding talent and infrastructure both within the frontline.
To be able to support the growth of the company, but also in risk management areas and other functions of the company to be able to build that foundation for growth that I've been here now just almost two five years and thats been two years of solid work.
Mark Kochvar: I feel great about where we are.
Mark Kochvar: From a foundational standpoint.
Mark Kochvar: We think the opportunities are going to be.
Mark Kochvar: More attractive as we move forward into 'twenty four 'twenty five.
Mark Kochvar: Great. Thank you guys I appreciate it <unk>.
Mark Kochvar: Okay.
Again, if you would like to ask a question press Star one on your telephone Keypad. Your next question comes from the line of manual novice from D. A Davidson your line is open.
Mark Kochvar: Hey, good afternoon in the past you've talked a little bit about some NIM protection.
Chris Martin: With rate cuts kind of a little bit more.
Chris Martin: Closer to happening.
Chris Martin: Have you added more since last time, we talked.
Chris Martin: <unk> added more swaps what are you kind of thinking.
Chris Martin: However, NIM can perform on the way down.
We haven't had any more swaps, but we've continued to add some fixed rate loan exposure and.
Chris Martin: Fortunately or unfortunately, depending how you look at it that the increase in our.
Chris Martin: The cost of deposits, especially those that are non CD gives us.
Chris Martin: Yes, something to reduce on the way down.
Chris Martin: No.
Chris Martin: In the last cycle from the last I've corrected now.
Chris Martin: Used our sensitivity to rates by about half so even though we still have that exposure that I talked about before that is about half of what it was.
Chris Martin: In previous cycles due to the things due to the better mix of deposits that we have and the swaps and better loan mix from a fixed to float standpoint.
Chris Martin: I appreciate that.
Chris Martin: Chris was excited about the five 5% core deposit growth is that.
Chris Martin: And you talked about some of the initiatives that youre doing or is that kind of all tie up to like keeping the loan to deposit ratio, where it is and see it improving.
Chris Martin: Just can you talk a little bit about deposit deposit trends on the volume side.
Chris Martin: Yes. So it is whether it's to keep the loan to deposit ratio at a certain level or not we firmly believe that the.
Chris Martin: The essence of our customer relationships stop stops and starts with their deposit relationship.
Chris Martin: It's been the focus that we've had for a while.
Chris Martin: And so we've added talent, we've built built product.
Chris Martin: And we've done a lot of work.
Chris Martin: Within our company from <unk>.
Chris Martin: Data and customer analytics standpoint, which is allowing us to be a lot more targeted from the standpoint of.
Chris Martin: Spending time with those customers, we believe have more opportunities and.
A lot of proactive customer outreach in this.
Chris Martin: A positive thing for our company when you look at our net promoter scores and some of the things we have from a customer experience standpoint, we've got really strong relationships.
Chris Martin: Gives us an expansion opportunity so.
Chris Martin: The team is their focus their skill set the product capability that we have.
Chris Martin: The data and information that we've got backing us up.
Chris Martin: All of those things factor into into some of that loan growth deposit growth that.
Chris Martin: That youre seeing.
Chris Martin: Our goal is to continue those trends.
Chris Martin: Yes.
I appreciate that.
Chris Martin: My last question is on loan growth.
Chris Martin: Speed I understand there's some seasonality but.
Chris Martin: But do you need rates to it too.
Two.
Chris Martin: Two rates improve that pace.
Chris Martin: They come down like how do rates kind of impact your kind of your appetite for it.
Chris Martin: I'll ask Dave to jump in but one arguably could be if rates go down really fast I can tell you there is a slowdown in the economy, which.
Dave Smith: It'd be a slowdown in loan demand for our entire industry.
Dave Smith: We have a lot of conversations with customers are certainly attuned to the rate environment, but for the most part.
Dave Smith: They've worked through this rate cycle, and it's really more of being with the right companies at the right time that are looking for growth and be able to being able to deliver for them and that's where the work that David and the teams have done to add talent to the company and stay focused.
Dave Smith: I don't see the growth.
Dave Smith: Being impacted significantly by changes in rates unless there is a dramatic reduction in term rates, which might cause some refinance activity.
Dave Smith: I think we understand our customers, we know where they're headed our job is to help them achieve their goals.
Dave Smith: And then adding to the team and making sure that we're focused on rounding rounding out the relationships is what we're focused on so I wouldn't I wouldn't put two together and get four relative to loan growth and a reduction in rates.
Dave Smith: Perfect. Thank you guys.
Dave Smith: Yes.
Dave Smith: Your next question comes from the line of Matthew Breese from Stephens, Inc. Your line is open.
Dave Smith: Hey, Good afternoon, Hey, Matt Hey, Matt.
Matthew M. Breese: Just a few follow ups for me. The first one is just what proportion of the loan portfolio.
Matthew M. Breese: A portion of deposits reprice immediately.
Matthew M. Breese: So on the on the on the loan side, it's kind of low 40 that would reprice immediately.
Matt Hey: On the on the deposit side on that on the most immediate side there really isn't aronson very much at all at one point, we had a product that was tied to fed funds, but we.
Matt Hey: <unk> that or change that going into this cycle. So we have at <unk>.
Dave Smith: Dave had alluded to we've made a lot of we've done some exception pricing.
Dave Smith: <unk> allows us we feel like are we will reprice down as rates go down, but it's more on a.
Dave Smith: One by one basis that will go through and work through that through that book.
Dave Smith: Got it okay, well most of our peers.
Dave Smith: These are going to be bar, we have we do have a fair amount of brokered.
Chris Martin: Deposits and all of our bonds all of those there is $800 million of that that will reprice down.
Chris Martin: Much of the EBITDA.
Chris Martin: Okay.
Chris Martin: And then excluding the broker for the expectation for core deposit betas as rates as rates decline.
Chris Martin: As great as rates decline.
Chris Martin: Yes on the way down.
Chris Martin: Yes, I mean, we haven't fully modeled that model that out I think we still have a little bit.
Chris Martin: Way to go even if even if rates were to move down there is probably going to be a little bit of a push.
Chris Martin: Push and pull and not certainly not all of our customers have had.
Chris Martin: It has gotten higher rates from where they were yet so I think it will be the response from the net deposit side on that initial rate down the first.
A couple of cuts will probably have not a very high down data I would expect got it.
Speaker Change: And then last one from me.
Speaker Change: Their incremental quarter, we get a little closer to that $10 billion threshold and I was curious.
Chris Martin: And in your budget to cross $10 billion this year or for 2025.
Chris Martin: And then just remind us all the unnecessary details in terms of.
Matt Hey: <unk> Durbin and whether you plan to cross.
Matt Hey: Organically or through deals.
Matt Hey: Okay.
Matt Hey: Well.
Matt Hey: Could you just map.
Matt Hey: Map out our expected asset growth.
Matt Hey: See it could be.
Matt Hey: Within 2024, but certainly by the by the end of 2025.
Mark Kochvar: Mark as the Durbin number.
Mark Kochvar: That we've calculated in the past six $7 million approximately.
Mark Kochvar: I would say that we're a lot of the work that we've done on the expense side from a people standpoint has been to build out the infrastructure for the expectation of just that so you don't Cros and then you go do the work you prepare.
Mark Kochvar: To do that from an additional regulatory regulatory oversight with three lines of defense risk management standpoint, all of the things that are there and I would tell you we're essentially there.
We've got the teams in place we've got the infrastructure in place. So there is no big investment that's needed from the standpoint of how we run the place.
Mark Kochvar: On a daily weekly monthly basis is going to change dramatically.
Mark Kochvar: As it relates to organically or Inorganically, we have a lot more control over their organic growth and thats where were focused while at the same time doing everything we can to prepare for inorganic opportunities.
Mark Kochvar: Got it okay. That's all I had a limit there thanks for taking my questions.
Your next question comes from the line of Daniel Cardenas from Janney Montgomery Scott Your line is open.
Daniel Edward Cardenas: Good afternoon, guys, Hey, Dan.
Daniel Edward Cardenas: Ken can you remind me how much.
Ken: Cash flows generated each quarter from your securities portfolio.
Daniel Edward Cardenas: Is that going to be put back into the securities portfolio or are you going to use that to fund expected loan growth.
Ken: Well, probably keep the securities portfolio at least where it's at and if depending on the asset growth, we might add a little bit to that.
Ken: To keep that level just to maintain our asset liquidity levels. We do have a relatively small securities portfolio. So we don't see that going any lower any lower.
Mark Kochvar: On a quarterly basis, I think I think we're in kind of the.
Mark Kochvar: $30 million to $40 million per quarter range.
Mark Kochvar: Cash flow coming back.
Mark Kochvar: But as that well, probably reinvest we will reinvest that into the bond portfolio.
Mark Kochvar: Portfolio.
Mark Kochvar: Okay.
Mark Kochvar: And then maybe just going back to the M&A question that you had earlier geographically.
Chris Martin: And I know you guys are opportunistic, but where would the focus be would it remain in Pennsylvania would you go outside of the state.
Chris Martin: We've talked about.
Chris Martin: <unk>.
Chris Martin: Then our core in contiguous markets. So we love the geography that we're in which is inclusive of the.
Chris Martin: State of Pennsylvania, and Ohio, and the marketplace is one that we know very well and so that's kind of that general geography.
Chris Martin: Relative to our headquarters here.
Chris Martin: We'd be where we're focused.
Chris Martin: And would this be more for deposit place, we'd be looking for like a deposit heavy institution.
Matt Hey: Whether its deposit place or deposit heavy I think typically in an acquisition.
Matt Hey: The franchise stops and starts with the with the deposit franchise and the quality thereof.
Matt Hey: If a customer deposit relationship by where they have their deposits, that's where you need to start to understand the customer base that you are picking up but it may be additional infill in a geography or expansion into into geography.
Matt Hey: It's an area that we already know well, we just want greater share or greater presence those things would would go into it a strategic fit with our organization.
Matt Hey: That would make a lot of sense and then obviously has a good understanding of the asset quality would be.
Matt Hey: A driver as well, but most.
Matt Hey: Opportunities like this to start.
Matt Hey: On the deposit side of things because again that represents the quality of the and the potential long term earnings power in the additive nature of the enterprise through our company.
Matt Hey: Got it okay. Good. Thank you all of my other questions have been asked and answered I'll step back okay.
Matt Hey: There are no further questions at this time I would like to turn the call over to Chief Executive Officer, Chris Mccormick for closing remarks.
Matt Hey: Well.
Chris Mccormick: Well listen we really appreciate everybody's attention and your thoughtful questions and engagement.
Chris Mccormick: Certainly are available if you've got any follow up at all in one a dialogue further.
Chris Mccormick: Again, we're really really proud of 2000 and.
Chris Mccormick: 'twenty three and those record earnings and record earnings per share. That's two years in a row that this performance has been achieved and we're quite optimistic about as we head into 2024 and everything that we're doing to execute on and deliver so I hope everybody has a great rest of the day and thank you for your time.
Chris Mccormick: This concludes today's conference call. Thank you for your participation you may now disconnect.
Chris Mccormick: Yeah.
Chris Mccormick: Inventory for and everything that we're doing to execute on and deliver so I hope.