Q4 2024 Provident Financial Services Inc Earnings Call
Good morning, and welcome everyone to the Provident Financial Services, Inc. Fourth quarter earnings Conference call. All lines have been placed on mute to prevent any background noise I figured the speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time keep you abreast star followed by the number one on your telephone keypad.
Like do we draw your a question press Star one again, thank you.
Speaker Change: I would now like to turn the call over to Adriana Duarte.
Investor Relations Officer. Please go ahead Sir.
Speaker Change: Thank you Christophe and good morning, everyone and thank you for joining us for our fourth quarter earnings call. Today's presenters are president and CEO, Tony Robbins, and senior Executive Vice President and Chief Financial Officer, Tom Lyons before beginning their review of our financial results. We ask that you. Please take note of our standard caution that's there.
Speaker Change: Any forward looking statements that may be made during the course of today's call. Our full disclaimer contained in last evening's earnings release, which has been posted to the Investor Relations page of our website Provident that back now it's my pleasure to introduce Tony loved to Zeta, who will offer his perspective on our fourth quarter Tony.
Tony: Thank you Adriana happy new year, everyone and welcome to the Provident financial services earnings call.
Tony: Our fourth quarter 2024 was characterized by a more favorable macroeconomic environment with continued grow additional interest rate cuts and improved performance in the banking sector and an optimistic outlook.
Tony: The Providence team maintained solid core performance and profitability, thanks to the excellent asset quality good deposit growth.
And the increasing contributions of our fee based businesses.
Tony: During the quarter, we reported net earnings of $48 5 million or 37 cents per share our annualized adjusted return on average assets was 1.05% and our adjusted return on average tangible equity was $15 three 9%.
Tony: Our adjusted pre tax pre provision return on average assets was 153% for the fourth quarter.
Tony: We are pleased with our core financial results and are confident in our ability to build on this momentum going into 2025.
Tony: At the end of 2024, our capital levels remained healthy and comfortably exceeded levels seem to be well capitalized.
Tony: Normalizing for changes in OCI, our tangible book value per share grew 34 cents to $14 71.
Tony: And our tangible common equity ratio was consistent with the trailing quarter at 767%.
Tony: As such our board of directors approved a quarterly cash dividend <unk> 24 per share payable on February 28.
Tony: During the quarter, our deposits grew $248 million or five 4% annualized the average cost of total deposits decreased 11 basis points to 2.25% and the average cost of interest bearing deposits decreased 15 basis points.
Tony: Our total cost of funds decreased 14 basis points to 248%, which remains favorable relative to our peer group.
Tony: As a result, our core net interest margin expanded four basis points. However, our reported margin compressed three basis points to 328% due to a decrease in purchase accounting accretion.
Tony: During the fourth quarter, our commercial lending team closed approximately $713 million of new commercial loans.
Tony: However, we experienced approximately $328 million in loan pay offs, resulting in a modest growth in our portfolio.
Tony: This quarter's production consisted of 53% commercial real estate, 47% commercial and industrial loans roughly one half of the C&I production was in our specialty lending.
Tony: While on the topic of lending we are excited to announce that as of Monday.
Speaker Change: <unk> Bank has joined us as our new Chief lending officer, following the retirement of John Rat.
Tony: Bill was responsible for.
Tony: For leading our commercial lending growth strategy and brings with him over 30 years of experience in commercial banking credit administration, and an impressive track record in credit risk management and operational strategy.
Tony: In the past 20 years Bill worked at TD and numerous leadership positions and most recently spearheaded its middle market and asset based lending businesses with responsibility for a $24 billion portfolio.
Tony: I am very confident that he will succeed in driving responsible growth and our commercial lending group.
Tony: In addition to hiring Bill we have added more resources to our lending teams and have expanded our lending presence in Pennsylvania and Westchester.
Tony: Our credit quality is strong and for the for the quarter continued to improve as our nonperforming loan ratio decreased eight basis points to 39 basis points.
Tony: This ratio compares favorably relative to our peer group.
Tony: Our net charge offs also decreased to $5 5 million from $6 8 million in the trailing quarter, which is also low relative to our peer group.
Tony: We are confident in our underwriting and portfolio management standards as well as the quality of our portfolio.
Tony: We have seen a modest decrease in our total loan pipeline to approximately $1 8 billion in the fourth quarter from approximately 2 billion in the preceding quarter.
Tony: <unk> average interest rate is $6 nine 1% compared to 718% in the trailing quarter.
Tony: The pull through adjusted pipeline, including loans pending closing.
Tony: Approximately $1 billion.
Tony: This quarter Providence fee based businesses continue to excel.
Tony: Private and protection plus at 19% organic growth in the fourth quarter as compared to the same period last year.
Tony: In addition, it had over 16% organic growth over the last 12 months and its retention rate was 100%.
Tony: Beacon Trust assets under management grew to $4 2 billion, which represents a seven 5% growth relative to last year.
Tony: Income improved 12% relative to the last quarter of 2023 and was driven by good investment performance.
Tony: As we enter 2025, we are pleased that the merger is now behind US the fundamentals of our company are strong and we have built a solid foundation for growth.
Tony: We are optimistic about the operating environment and our ability to build our business, which will help us produce even more value for our customers employees and stockholders.
Tony: Now I'll turn the call over to Tom for his comments on our financial performance, Tom. Thank you Tony and good morning, everyone.
Tom Lyons: As Tony noted, we reported net income of $48 5 million or <unk> 37 per share for the quarter.
Tom Lyons: Excluding charges related to our merger with Lakeland Bancorp earnings was $62 $9 million in the current quarter or <unk> 48 per share with a core ROA of 1.0% to 5%.
Tom Lyons: Further adjusting for the amortization of intangibles, our core return on average tangible equity was $15 three 9% for the quarter.
Tom Lyons: Note that all merger related charges have now been recognized with no further merger expense to be recorded in 2025.
Tom Lyons: Excluding merger related charges pretax pre provision earnings for the current quarter were $91 $8 million or an annualized 153% average assets.
Tom Lyons: Revenue totaled $205 9 million for the quarter and our core net interest margin increased four basis points from the trailing quarter to 285%.
Tom Lyons: Including 43 basis points of purchase accounting accretion our net interest margin was 328% for the fourth quarter.
Tom Lyons: We currently projected NIM and the $3 35 to $3, 45% range for 2025.
Tom Lyons: Our projections include two additional 25 basis point rate reductions in September and December 2025.
Tom Lyons: During the quarter, we reclassified $151 $3 million of non-religious and ship equipment lease loans to held for sale.
Tom Lyons: Excluding this transfer period end total loans were essentially flat for the quarter as growth in multifamily and commercial loans was largely offset by reductions in CRE construction and residential and consumer loans.
Tom Lyons: December closings were strong however, and our pull through adjusted loan pipeline at quarter end was $1 billion with a weighted average rate of 698% versus our current portfolio yield of 599%.
Tom Lyons: Deposits increased $248 million or an annualized five 4% from the trailing quarter to $18 6 billion at December 31 with.
Tom Lyons: With growth driven by municipal and consumer noninterest bearing and money market balances.
Tom Lyons: As a result, our loan to deposit ratio decreased slightly to 101%.
Tom Lyons: The average cost of total deposits decreased 11 basis points to 2.25% this quarter.
Tom Lyons: Asset quality remains strong with nonperforming loans, representing just 39 basis points of total loans NPA assets declining to 34 basis points.
Tom Lyons: Total delinquencies at 57 basis points of loans and criticized and classified loans totaling $2 67% of loans.
Tom Lyons: Net charge offs were $5 $5 million or an annualized 12 basis points of average loans this quarter.
Tom Lyons: The provision for loan losses decreased to $7 $8 million this quarter, reflecting specific reserve requirements and some deterioration in the macroeconomic variables that drive our seasonal estimate.
Tom Lyons: This increased our coverage ratio to 1.0% to 4% of loans at December 31.
Tom Lyons: Noninterest income decreased to $24 million this quarter, mainly due to fewer boldly benefit claims and a seasonal reduction in insurance agency income.
Tom Lyons: Noninterest expenses, excluding merger related charges were $114 million with expenses to average assets declining to 190% in the efficiency ratio improving to 55, 4% for the quarter.
Tom Lyons: Noninterest expenses for the quarter included certain items that are not expected to recur in the 2025 run rate, including a $1 $4 million litigation reserve charge and approximately $1 6 million of year end adjustments to incentive accruals.
Tom Lyons: We currently project quarterly core operating expenses of approximately $112 million to $115 million for 2025.
Tom Lyons: Our effective tax rate for the quarter fell to 22, 6% due to a $4 $2 million benefit recorded on the revaluation of certain deferred tax assets.
Tom Lyons: Currently expect our 2025% effective tax rate to approximate 29, 5%.
Tom Lyons: Regarding projected 2025 financial performance. We currently estimate return on average assets of approximately 1.15% and return on tangible equity of approximately 16% with an operating expense ratio of approximately 180% and an efficiency ratio of approximately 52%.
Tom Lyons: That concludes our prepared remarks, we'd be happy to respond to questions.
Tom Lyons: At this time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad.
Tom Lyons: For just a moment to compile the Q&A roster.
Speaker Change: And your first question comes from the line of Mark Fitzgibbon with Piper Sandler Mark. Please go ahead.
Mark Fitzgibbon: Hey, guys good morning.
Speaker Change: Good morning.
Mark Fitzgibbon: First question I had Tom.
Mark Fitzgibbon: Yeah.
Speaker Change: I guess I'm curious, how you hit that $26 million fee projection in like the third and fourth quarter when insurance revenues declined seasonally what what's kind of the offset there I mean, what are some of the other items that you anticipate being higher.
Mark Fitzgibbon: To mitigate that seasonal decline in insurance.
Mark Fitzgibbon: Yes, that's an average over the course of the year Mark So we're going to see seasonal improvement in the first half of 2025. In addition, there is some volatile items in there as you know regarding gains on loan sales swap fee income.
Mark Fitzgibbon: SBA loan sales insurance contingency in the first quarter, which makes it higher than 26 million.
Mark Fitzgibbon: So boldly death benefit claims, we don't model, those but theres, a actuarial component to that where we see some recognition of income there. So overall, we expect the 26 million a quarter is a reasonable number.
Mark Fitzgibbon: So for the bully number.
Speaker Change: Is that a normal run rate, excluding that benefit sort of two and a $2 3 billion as at a.
Mark Fitzgibbon: The right number.
Mark Fitzgibbon: Is that on top of what we reported earlier Mark I think that's correct. This quarter had none so thats a typical run rate mark.
Mark Fitzgibbon: Okay great.
Mark Fitzgibbon:
Mark Fitzgibbon: And then I guess your expense guide looks like it assumes some pretty heavy lifting I guess what are some of the bigger pieces of that.
Mark Fitzgibbon: Do we have cost synergies coming.
Speaker Change: Residual stuff from the Lakeland deal.
Mark Fitzgibbon: Or is there other things where you think you can do.
Mark Fitzgibbon: He is sort of reduce expenses.
Mark Fitzgibbon: Yes, I mean, we kind of worked off of the beginning reported expense for this quarter more a fact that the nonrecurring items that I mentioned, a few of them in the comments.
Mark Fitzgibbon: Took into account the additional payroll employer payroll taxes in the first quarter.
Mark Fitzgibbon:
Mark Fitzgibbon: We worked through the full cost savings, which were realized at the end of Q4. So we took full benefit for that in Q1, when we get to I'm getting about 113 or $14 million for the first quarter. So the 112 to $1 15 guide seems reasonable we'd expect to see that stabilize maybe even trail off a little bit in the back half of the year.
Speaker Change: Okay, and I think you said, you're assuming $2 25 basis point cuts in rates.
Speaker Change: What is each 25 basis point cut mean for NII or the margin.
Speaker Change: To be honest not a whole lot the balance sheet is so neutral that we ran a number of scenarios both with growth in different right.
Speaker Change: Cut environments, and very tightly clustered in terms of NIM and the difference in net interest income at most a couple of million dollars up or down a couple of hundred basis points even.
Speaker Change: Okay, and lastly, Tony I guess I am curious from your perspective.
Speaker Change: What are sort of the top two or three priorities for the company right now.
Speaker Change: Sure.
Speaker Change: So piece of you know provident.
Speaker Change: We're pretty good at the risk management and our balance sheet is pretty strong so as we move into into 2025 and beyond this year.
Speaker Change: In no particular order I would probably say the continuing to build on our culture and nurtured a team dynamics of bringing two companies together a growth growth and growth are still going to be our biggest focus for this year. All in all sectors. I think some of the things that we're excited about is the changes that are happening in our commercial bank.
Speaker Change: Treasury management unchanged from good dynamic growth bearing deposits our fee based businesses are still drug and lastly, I would say you'd focus about deepening share across the channels.
Speaker Change: That's big and I think with the Lakeland merger being able to to deploy some of that is also going to be very accretive for us and we want to do this while I don't know you mentioned that while we are maintaining operational efficiency. So that's really the focus for me and the team as we move into 2025.
Speaker Change: Thank you.
Mark: Welcome Thanks Mark.
Speaker Change: And your next question comes from the line of Billy Young with.
Billy Young: With RBC capital markets. Please go ahead.
Billy Young: Hey, guys how are you.
Speaker Change: Good morning.
Billy Young: Got it.
Billy Young: Just.
Speaker Change: I guess first just kind of like a bigger picture question.
Billy Young: Kind of looking at your adjusted returns for the quarter.
Billy Young: And 2025 return targets just kind of how do you think about how do you think those returns kind of stack against.
Billy Young: Your longer term franchise goals do you see room to kind of optimize and do better than that longer term.
Billy Young: Okay.
Billy Young: And I think there is the continued ability to gain efficiencies and scale, which shouldnt continue to improve the returns metrics overall.
Billy Young: Add to that that we've done.
Billy Young: Yeoman's job a lot of effort this year in building the foundation for an organization there could be some good strong growth.
Billy Young: We've done much and I think we're prepared and I think as we continue to build we won't have the scale up at the same level. So we can take advantage of that.
Billy Young: We put we put some good dynamics for loan growth in this coming year.
Billy Young: And we will continue to look at areas to become even more efficient. So I think it's really growing our businesses and being able to handle the scale without adding to the operating expenses.
Billy Young: Okay.
Billy Young: Got it thank you for that.
Billy Young: And then just.
Billy Young: Switching to loan growth a little bit.
Billy Young: I think we've spent the last couple of quarters talking about kind of improving.
Billy Young: Activity and.
Billy Young: Better customer sentiment hasn't really shown up in the bottom line numbers, yet, but I can understand there's some moving parts this quarter.
Billy Young: Feels like payoff.
Billy Young: Payoff activity was a little bit elevated this quarter, it's been a little bit of a headwind kind do you need to see that.
Billy Young: Moderate a little bit to kind of get to your 5% growth.
Billy Young: <unk> target for 2025 or.
Speaker Change: What is it that gives you confidence that you'll get there.
Billy Young: Bob.
Billy Young: If you remember last quarter, we gave a little bit.
Billy Young: Washington that we might see some creep prepayments and we saw some of that this quarter. We also had about 50% of the 328 million that I mentioned was just maturities or.
Billy Young: And loans and sale of the underlying property. So thats just something that you can't really gauge.
Billy Young: And about half was refinancing away from us so the way I feel comfortable about it is we've made some good dynamic changes in our commercial bank. We have good leadership team there that.
Billy Young: Across all our segments that can really build our business we are seeing activity.
Billy Young: If the operating environment cooperates.
Billy Young: And the rate cycle, I think that we're going to really jump ahead right. So there is a small headwinds that I mentioned, but we have the appropriate complement to be able to produce growth in excess of the numbers that we're guiding you guys on and.
Billy Young: Yes, just to give you a sense the $712 million that we closed this quarter.
Billy Young: We really need to be somewhere at the size of the bank that we are now between $24 $25 billion, we need to be closer to about eight $8 million to $900 million of production and then you take about 40% of that and Thats, where it really affects dose to your outstandings that sort of.
Billy Young: The algorithm or calculus that we do and so we're able to see that at 712 in there.
Billy Young: This environment. So again, the only thing I would caution as the operating environment in terms of Providence.
Billy Young: Capacity and having the right complement the right leadership the right go to market strategy enhancing our Treasury management I'm pretty excited about that and I think 25 is going to is going to demonstrate that but we've had.
Billy Young: Some head winds of change.
Billy Young: Obviously, John retired our CLO, we've got new changes there.
Billy Young: We see opportunities coming from from even the legacy organizations of some of those post change agents have come to us from so long winded answer to say I know it hasnt shown up in our in our results in the last couple of three quarters.
Speaker Change: We're feeling pretty good about the foundation to build as we move forward, yes, if I could just add a couple of thoughts Sony I think our market position. Currently is very strong I know some of our competitors had some other internal issues that theyre dealing with it. So I think we have the ability to be a real dominant player in that over the next year I think Tony method is a little bit some of the distractions we saw with.
Speaker Change: <unk> and core systems conversion all of that's behind US now so I think theres a full focus on on moving forward and then and Tony as prepared comments you did reference Bill think joining us as chief lending officer and some other adds in the revenue producing side that we expect to see really generate some growth.
Speaker Change: Pretty optimistic yes, I would add is I would say one last thing if you.
Speaker Change: On that we have been historically very strong on growing the <unk> side of the business. If you look at the real.
Speaker Change: Underlying <unk>.
Speaker Change: Sort of silver lining in our commercial growth in our production is that most of the growth we've seen as calm in the C&I space in our specialty lending businesses, which have done really well.
Speaker Change: <unk>, which I think we could ramp up we had some some noise around <unk>. This year, if we can ramp up our credit to this traditional levels, which I think thats probably easier for us to do than the other sites that we should achieve the numbers that.
Speaker Change: We're guiding to and maybe overachieve.
Speaker Change: I appreciate it thank you for taking my questions.
Speaker Change: Sure.
Speaker Change: And your next question comes from the line of Kevin <unk> with Ww Dale. Please go ahead.
Speaker Change: Hey, good morning, Thank you for taking my questions.
Speaker Change: My first one is on.
Speaker Change: Kind of looking for a little bit more clarity on the expense outlook kind of a wide range there.
Speaker Change: Youre talking about $113 million to $140 million for the first quarter, but then it may be trails down a little bit in the back half of the year, what would be driving that improvement later in 'twenty five is that like seasonality or.
Speaker Change: Some initiatives you have that would maybe be coming offline.
Speaker Change: Yes, typical seasonality, Tim with the employer payroll tax thresholds being achieved in some of the.
Speaker Change: Utility maintenance kind of costs that you see in the colder months of the year being a little bit more elevated in the first quarter.
Speaker Change: Okay, and what would maybe drive you I guess to the higher end of your range that you think at $1 13, $1 14, Q1, and then down from there.
Speaker Change: Only additional investments in terms of core operating expense I mean things that come that I consider to be outside of operations would be.
Speaker Change: Decisions made around resolutions of nonperforming assets as an example, where you might take a loss thats not reflected in these core.
Speaker Change: <unk> core projections.
Speaker Change: Okay.
Speaker Change: And sorry, if I missed this earlier, but is this quarter a good level for purchase accounting accretion going forward.
Speaker Change: Yes, it's a good base Tim.
Speaker Change: It's a little bit unpredictable cluster the volatilities in the cash flows I mean, what happened to us this quarter as we saw fewer prepayments of loans that had acquisition discounts and we actually saw some prepayments of loans I'd add acquisition premiums in the SBA book that was acquired.
Speaker Change: Theres not a lot of premium loans left in there it's about total of about $2.4 million.
Speaker Change: But that was about $800000 of the reduction in the current quarter.
Speaker Change: Oh Wow okay.
Speaker Change: And I think we've asked this before but are you guys considering the securities restructuring just given the change in the yield curve and with some of your lower yielding assets. It seems like you could give you a nice earn back are relatively quick.
Speaker Change: No Tim I think we continue to feel that it's appropriate to hold the assets. We don't see the again in an efficient market. We don't see the earn back in a short enough timeframe to warrant that we did do the restructuring in connection with the acquisition of about 650 with about 550 million.
Speaker Change: Our $50 million at the Lakeland acquisition, because there it made sense the the hit to equity was already baked in through the purchase accounting might want to add that we're thinking about this thoroughly since we made the announcement on the leasing.
Speaker Change: One family.
Speaker Change: That's true I mean, we did decide as you saw in the earnings release to exit.
Speaker Change: The non relationship portion of the equipment lease financing business.
Speaker Change: So I consider that a restructure its not a big spread business and we think there is it's just not attracted from from a building the franchise point of view and better use of capital.
Speaker Change: Okay that makes sense. Thank you guys.
Tom Lyons: Thank you thanks, Tom.
Speaker Change: And your next question comes from the line of Fed is strict lens with Talladega Betty. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Wondering if you can update us on the opportunity with upcoming CD maturities.
Speaker Change: And what Youre, what youre seeing on repricing Cds today.
Speaker Change: Yes.
Speaker Change: These repricing over the next 12 months total about $3 billion.
Speaker Change: Two in the first quarter.
Speaker Change: That 57 basis points, a pick up in the first quarter when I talked about how neutral our balance sheet is it's funny. If you look at floating rate loans are about $4 8 billion.
Speaker Change: And the maturing Cds and.
Speaker Change: And borrowings of about $4 $3 billion over the next 12 months.
Speaker Change: And then the flexibility on the rest of the other liability side of things. We also have a slight repricing downward on some of these specialty pricing deposits per month Cds.
Speaker Change: Yes that makes up the rest of the difference and why I say that regardless of the rate environment really the impact on the NIM is fairly minimal.
Speaker Change: Wilson.
Speaker Change: Got it and then I wanted to dig into fees really well it's in particular.
Speaker Change: Two questions on that number one is there an opportunity to move that average fee higher from that 73 basis points or so and.
Speaker Change: And then the second portion of that is D. C. What are the opportunities to go to the non advisory portion of the wealth business.
Speaker Change: Don't think that Theres, a lot of ability to up the fee rate to 73 is pretty strong relative to the industry and the peer group exactly I think the game for us in the system.
Speaker Change: AUM.
Speaker Change: And if we can keep the fee as a relative level I think that will be the success in that space. The second part of that question was with the.
Speaker Change: Is that the I didn't get the second part.
Speaker Change: Could you repeat it.
Speaker Change: <unk> portions.
Speaker Change: Women just grow the non advisory portions of the business.
Speaker Change: Yes, I think that that's been growing.
Speaker Change: For us.
Speaker Change: This year I think we did a 300 and something million dollars of Nu, mostly outside bank growth in that business, it's not a what I would call a material segment of our space.
Speaker Change: But it's a good contributor and ultimately I think I will.
Speaker Change: Love to see more graduation from that space and into as assets build and then two more of our beacon wealth business, so having more of a synergy there.
Ideally I think from my perspective, I see the greatest promise for US is to continue to synergize across the channels and have our AUM growth on the beacon side is going to be the greatest path for improved profitability, yes, Im not sure. If we understood. Let me just check the question I think Tony was referring to the non deposit investment products outside of Beacon.
Speaker Change: But I think you might've been asking about non advisory services provided by Beacon is that correct things like taxes state that kind of.
Speaker Change: That's correct I was just wondering whether that.
Speaker Change: The pie grows a little bit for those sections relative to the non advisory are relative to the advisory part of the business.
Speaker Change: It does but it's a relatively small portion really the money at Beacon has made through the advisory services.
Speaker Change: Got it and just last question wanted to touch on credit I know, there's not a ton in terms of npa's, but could you talk about potential opportunities to resolve.
Speaker Change: Some of the nonperforming loans over the course of 2025.
Speaker Change: Continued we continue to work with the customers. We look at note sales to see where they make sense.
Speaker Change: On the on the Oreo side, we start with trying to work through a couple of resolutions on the remaining I think its about $9 $6 million left and in real estate owned.
Speaker Change: We expect to see some of that continue to move they don't we do a pretty good job of retaining those nonperforming assets a relatively short period of time I think we have a good group than the resolution area and Theyre. Good active strategies on the best path out for all of the things that are moving into so we're pretty comfortable that things don't stay there forever and there was a good exit strategy.
Speaker Change: Alright, great. Thanks for taking my questions.
Speaker Change: Thank you.
Speaker Change: And our final question will come from the line of Manuel <unk> with D. A Davidson Manuel Please go ahead.
Speaker Change: Hey, good morning could you speak a little bit more to the good morning can you speak a little bit more to the kind of the wildcards around the NIM range, what could get you to the top and look at getting to the bottom.
Speaker Change: Really the biggest drivers of the shape of the curve so long as the longer end stays somewhat anchored on the 10 year side of things.
If especially thats why we see a little bit of a pickup rates down versus rate up rates up is that we see more benefit to the wholesale funding cost and a little bit on deposits, but at deposits you get to a level, where I think the beta sites dropped more.
Speaker Change: So thats really the primary challenge there is just that the shape of the curve changes materially.
Speaker Change: <unk>.
Speaker Change: The other thing would be the accretion, which is volatility and growth overall rate we talked about.
Speaker Change: Last quarter, I believe and we're going to continue to execute on that adding some to the securities portfolio I'd like to see that get up to about 15% of assets. The spread on that is a little lower so it could drive the NIM down a bit but still gives us greater net interest income.
Speaker Change: Sure.
Speaker Change: That's great.
Speaker Change: You've been able to lower deposit costs pretty pretty well is it.
Speaker Change: Is there any difference in the first 75 basis points versus December cut and.
Speaker Change: Is that is there still going to be some deposit costs fell into the first quarter beyond CD repricing.
Speaker Change: Yes, Youll see cuts that were effective January one.
Speaker Change: Okay.
Speaker Change: Any difference in the difficulty of those cuts or pushback.
Speaker Change: When the initial cuts came through that the communication was pretty clear that they're.
Speaker Change: We're going to be continued movements and in line with the fed for the most point so I would expect.
Speaker Change: Communications happened between the relationship managers and a lot of our customers.
Speaker Change: So not only did they inform about the rate cut that they informed about prospective rate cuts on what the impacts would be so.
Speaker Change: It shouldnt since the stability there we haven't.
Speaker Change: We're pretty we're pretty comfortable that the clients are well informed.
Speaker Change: And their behaviors.
Speaker Change: One of the things we saw this quarter, which wasn't clearly pointed out. We also saw some good consumer deposit flow and most of that growth happened in the consumer side, both noninterest bearing and interest bearing and also some municipal power business deposits, we're actually cycling down through the payment of bonuses taxes et cetera, which we we didn't see.
Speaker Change: The account closures. So most of that will we expect to kind of recycle back and so with the consumer activity coming back which has been the outflows over the last.
Speaker Change: Since COVID-19.
Speaker Change: That is probably a good a good indication that that flows in <unk>.
Speaker Change: Commercial deposits come back and we will.
Speaker Change: It should bode well for our growth as we move forward.
Speaker Change: I appreciate that.
Speaker Change: Can you expand a little bit more on the just kind of shifting gears to the opportunity geographically you brought up.
Speaker Change: Pennsylvania in Westchester just could you add some more color the sizing or timing of that opportunity.
Speaker Change: Sure.
And Mike in my spoken comments earlier, I mentioned that we had more complements to our current lending teams.
Speaker Change: Present markets. In addition to that we've also expanded by having I think a four person team into Pennsylvania, and I think to more individuals into decrease based in Pennsylvania.
Speaker Change: So that will help us grow the we have a sort of a more focused strategy and building out our eastern Pennsylvania marketplace, which we have a good presence.
Speaker Change: And I think those folks to help us build that in tandem working with our other retail side, we're looking at bulk building.
Speaker Change: Not only the commercial but the treasury management and deposits as well in that market and then we've added some complements in the Westchester New York Westchester not Western Pennsylvania.
Speaker Change: To be able to build out some of the lending in that space. So.
Speaker Change: We're pretty comfortable and I think they'll think coming onboard.
Speaker Change: Perhaps a whole build out his team from from folks that follow him and.
Speaker Change: It's pretty exciting time, I know, it's not showing up in the in the balance sheet just yet.
Speaker Change: But I'm pretty comfortable that we have set the foundation for good growth as we move forward.
Speaker Change: Thank you I appreciate the commentary.
Speaker Change: Thank you.
Tony: That concludes our Q&A session I will now turn the call back over to <unk> for closing remarks, Tony.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Oh.
Speaker Change: I just wanted to say thank you to everyone.
Speaker Change: Appreciate the good questions this quarter.
Speaker Change: I am pretty comfortable and optimistic for Providence future I wish you all.
Speaker Change: Good 2025, and look forward to having conversations with you in the near future.
Speaker Change: Thank you.
Speaker Change: This concludes the meeting thank you all for joining you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.