Q4 2024 Valley National Bancorp Earnings Call
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Speaker Change: Good day and thank you for standing by welcome to the Q4 2020 for Valley National Bancorp Earnings Conference call. At this time, all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will didn't hear an automated message advising that your hand is raised.
Speaker Change: Your question. Please press Star one again, please be advised that today's conference is being recorded I would now like to turn the conference over to your speaker today Travis Lan. Please go ahead.
Travis Lan: Good morning, and welcome to valleys fourth quarter 2024 earnings Conference call I'm joined today by CEO IRA Robbins President.
IRA Robbins: And Chief Credit Officer, Mark Baker before we begin I would like to make everyone aware that our quarterly earnings release and supporting documents can be found on our company website Valley Dot com when discussing our results we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to today's earnings release for reconciliation to these non-GAAP measures. Additionally, I would like to highlight slide two of our earnings.
IRA Robbins: Presentation and remind you that comments made during this call may contain forward looking statements relating to valley National Bancorp and the banking industry Valley encourages all participants to refer to our SEC filings, including those kinda on forms 8-K, 10-Q, and 10-K for a complete discussion of forward looking statements and the factors that could cause actual results to differ from those statements with that I'll turn the <unk>.
IRA Robbins: Call over to IRA Robbins.
IRA Robbins: Thank you Travis during the fourth quarter of 2020 for Valley reported net income of approximately 116 million and diluted earnings per share of 20.
IRA Robbins: This compared to net income and earnings per share of <unk>, 98, and 18 cents a quarter ago.
IRA Robbins: Sequential growth in reported net income reflected a reversal of an income tax reserve due to the expiration of the statute of limitations associated with certain prior tax credits.
IRA Robbins: This was partially offset by an elevated loan loss provision associated with higher loan charge offs pre.
IRA Robbins: Pre tax pre provision earnings were stable as strong net interest income growth was generally offset by a handful of discrete expenses.
IRA Robbins: As you are aware our efforts in 2024 focus on strengthening the balance sheet and normalizing certain metrics that were outliers relative to peers.
IRA Robbins: The progress that we've made are significant and we outperformed the preliminary year end targets, which we laid out back in April.
IRA Robbins: As a result of our focused execution, we entered 2025 with a fortified balance sheet that will enable us to operate from a position of financial flexibility and strength.
IRA Robbins: While our strategic priorities remain consistent the specific initiatives that support our goals continue to evolve.
IRA Robbins: From a deposit perspective, we are focused on leveraging our specialty verticals and enhancing our commercial customer base.
IRA Robbins: We expect to supplement these efforts with branch deposit growth as we re prioritize retail delivery and customer acquisition.
IRA Robbins: On the loan side expected run off of certain transactional CRE loans should be offset by focused origination effort in the C&I owner occupied and consumer areas. We.
IRA Robbins: We anticipate that this will support a methodical reduction in our pre concentration ratio in 2025.
IRA Robbins: Finally, we continue to prioritize our suite of value add commercially adjacent products and services that support our fee income growth.
IRA Robbins: While most of our dialogue around our 2023 core conversion was focused on the expense synergies that we have realized it also set the foundation for significant enhancement in our product offerings and service capabilities.
IRA Robbins: A great example of this is on the Treasury solutions side, where we have augmented and upscaled the talent base with a streamlined operating model and the technology to better serve our commercial clients.
IRA Robbins: We formally rolled out a new service and pricing model in mid 2024, and we couldnt be more excited about the early results.
On an annualized basis deposit service revenue in the second half of 2024 with a full $11 million higher than for the same period, a year ago, representing a 27% increase.
IRA Robbins: Despite external volatility throughout the year.
IRA Robbins: Our transaction deposits at December 31, 2024.
IRA Robbins: One $7 billion or 5% higher than a year ago, largely owning to the to the commercial account onboarding to the treasury platform.
IRA Robbins: While less impactful from an absolute dollar perspective, we have seen some very strong returns from our investment in enhanced FX capabilities.
IRA Robbins: The annualized run rate for FX fees was 4 million higher in the second half of 2020 for the second half of 2023.
IRA Robbins: This represents over 50% growth and has helped to offset softer swap fees in our capital market business, reflecting the pullback in loan originations.
IRA Robbins: In 2025, we will preserve our balance sheet position and increase our focus on enhancing profitability.
IRA Robbins: With this in mind, we have laid a preliminary 2025 guidance on slide six of our investor deck.
IRA Robbins: We anticipate continued net interest income momentum as a result of earning asset growth and funding cost improvement against the backdrop of positively sloping yield curve.
IRA Robbins: The continuation of our fee income progress and the maintenance of our expense control will underpin the expected normalization of pre provision profitability as the year unfolds.
IRA Robbins: From a credit perspective, we are confident that our proactive efforts throughout 2024 and in the fourth quarter, specifically will lead to a meaningfully lower credit cost in 2025.
IRA Robbins: We believe the rapid expansion of our allowance coverage in 2024 is likely behind us and we expect more modest allowance coverage growth going forward.
IRA Robbins: Slide seven provides additional detail on our net interest income forecast.
IRA Robbins: While we traditionally utilized the year and implied forward curve to forecast, we acknowledged that longer and rates moved sharply higher at the end of the year.
IRA Robbins: As such our net interest income guidance range captures a variety of downside rate scenarios.
IRA Robbins: All else equal, we would expect a continuation of higher interest rates to be incrementally additive to our forecast.
IRA Robbins: The resulting profitability expectations associated with our guidance are laid out on slide eight.
IRA Robbins: The light blue bars indicate our forecast for the full year of 2025 as well as the fourth quarter of 2025, specifically.
IRA Robbins: This should help inform the ramp that we expect through the year as our asset repricing tailwind continues to play out.
IRA Robbins: Similarly, we anticipate that the net charge offs and our provision will decline significantly as the year progresses.
IRA Robbins: I am extremely excited about the opportunities ahead of us in 2025.
IRA Robbins: The interest rate environment has normalized and our customers are feeling optimistic about the economy. We are confident in our ability to improve profitability throughout the year and we will continue to diligently manage the balance sheet, while we execute on our strategic priorities.
IRA Robbins: Slide nine illustrates our longer term value that we continue to create for our stakeholders.
IRA Robbins: Our tangible book value inclusive of dividends has now doubled in the last seven years and a greater growth continues to outpace peers.
IRA Robbins: We remain focused on customer acquisition in both the commercial and consumer areas.
IRA Robbins: These customers contribute to our long term revenue opportunities and the future performance of our institution.
Speaker Change: As we have continuously discussed we are a much more diverse bank today than when I took over as CEO, our evolution into new business lines and geographies has created opportunities that were previously unavailable to us.
Going forward, we will continue to evolve with an internal focus on optimizing our customer network and balance sheet to become a better bank for our employees our clients and our shareholders.
Speaker Change: Before I turn the call over to Tom I wanted to offer our team's thoughts as individuals that have been impacted by the wildfires in California.
Speaker Change: While we have minimal direct loan exposure to the impacted areas. We are committed to the greater Los Angeles market, where we have recently opened a branch in Beverly Hills we.
Speaker Change: We are always there for those in need and our offer of support to the communities customers and employees that have been impacted by these tragic events.
Speaker Change: With that I will turn the call over to Tom and Travis to talk through the quarter's financial highlights and results.
Speaker Change: After Travis concludes his remarks, Tom Travis myself, and Mark CAGR, our Chief credit officer will be available for your questions.
IRA Robbins: Thank you IRA slide 10 illustrates the quarter's deposit trends direct customer deposits grew $1 $7 billion during the quarter, which enabled a $2 billion reduction in higher cost indirect deposits.
IRA Robbins: Non interest deposit balances increased for the second consecutive quarter and now comprised 23% of total deposits up from 22% a quarter ago.
IRA Robbins: For the second consecutive quarter, we opened over 25000, new deposit accounts, including over 10000, new non interest accounts.
IRA Robbins: In addition to our strong growth we have been extremely successful in reducing deposit cost and a wakeup fed funds target rate reductions.
IRA Robbins: During the quarter, we reduced deposit cost by 31 basis points, which resulted in a strong deposit beta of 51%.
IRA Robbins: We estimate that our average cost of deposits was $2, 87% for the month of December which includes only a partial benefit from the reductions implemented in the wake up the final fed action of the year.
IRA Robbins: The next slide provides more detail on the composition of our deposit portfolio by delivery channel and business line.
IRA Robbins: Growth during the quarter was broad based with branch deposits, increasing 4% and specialty deposits increasing closer to 5%.
IRA Robbins: Majority of our specialty deposit growth was at our international and technology business lines.
IRA Robbins: Slide 12 illustrates the components of the quarter's lending activity, we continue to manage the runoff of transactional multifamily and invest to create which declined over $600 million during the quarter construction balances declined another 350 million partially as a result.
IRA Robbins: <unk> of completed projects transitioning to permanent owner occupied loans.
IRA Robbins: As of December 31, 2024 hour Creek concentration ratio was 362% versus 421% a quarter ago and 474% at the end of 2023.
IRA Robbins: I am extremely proud of the significant progress we have made in improving this metric.
IRA Robbins: From a longer term perspective, the combination of C&I and owner occupied Cree loans increased 17% during the year.
IRA Robbins: Diverse activity across our geographic footprint and nationwide businesses supports our expectation for high single digit to low teens growth in those asset classes for 2025.
IRA Robbins: Similarly, indirect auto loans increased 17% in 2024.
IRA Robbins: These are super Prime loans with our lowest history that provide additional diverse growth opportunities to the bank.
IRA Robbins: While new origination yields have declined in line with broader interest rates our portfolio yield declined more modestly given the 40% of our loan portfolio that is fixed.
IRA Robbins: Our quarterly loan beta of 39% compares favorably to the 51% deposit beta that I referenced earlier.
IRA Robbins: Slide 13 provides additional detail on the compensation of our commercial real estate portfolio by property type and geography.
IRA Robbins: Portfolio remains diversified geography, and asset class and our borrower base remains generally strong and well positioned during.
IRA Robbins: During the quarter, we proactively address the handful of Cree loans, which enables us to enter $2025 a cleaner slate from a credit perspective.
Speaker Change: As <unk> stated earlier and you can see on our slide six guidance, we believe that most of the Cree charge offs are now behind us.
Travis Lan: With that I will turn the call over to Travis to provide additional insight into the quarter's financials.
Thank you Tom I'll jump to slide 17, which highlights the third consecutive quarter. Both net interest income growth and net interest margin expansion net interest income increased 3% from the third quarter and is now 6% higher than a year ago.
Travis Lan: Strong core deposit growth enabled the repayment of nearly $2 billion of higher cost maturing indirect Cds. This combined with our success in reducing customer deposit costs in the wake of fed cuts enabled us to more than offset the interest income headwind associated with adjustable loan repricing and the mid quarter Cree loan sale, our guidance of 9% to 12% at <unk>.
Travis Lan: Interest income growth in 2025 Conservative reflects a lower rate environment, we would expect to migrate towards or beyond the upper end of this range. If interest rates were to remain elevated or increase further all else equal.
Travis Lan: Our net interest margin should increase throughout the year as funding cost decline and we benefit from the asset repricing tailwind on the fixed rate component of our loan portfolio.
Travis Lan: The next slide illustrates the corner stability in adjusted noninterest income exclusive of an $8 million loss associated with our <unk> loan sale. The majority of this charge was related to transaction costs. Despite the quarter stability underlying trends are more positive as revenues in our capital markets wealth and insurance areas offset lower boldly income and a negative.
Travis Lan: Live valuation adjustment on our Fintech investment portfolio.
Travis Lan: Annualized adjusted noninterest income for the second half of 2024 was $236 million or 13% higher than $208 million for the second half of 2023 annualized.
Speaker Change: <unk> highlighted a few key drivers of this progress in his remarks, we plan to further leverage the investments that we've made in our treasury solutions, FX and syndication platforms and drive additional growth contributions from swaps and wealth management throughout 2025, which should further contribute to our profitability normalization.
Speaker Change: On Slide 19, you can see that adjusted noninterest expenses of $276 million were four 5% higher than the third quarter and approximately 1% higher than the fourth quarter of 2023. Most expense line items remained very well controlled during the quarter and higher technology costs were partially the result of a few discrete items for the year adjusted <unk>.
Speaker Change: <unk> increased less than 1%, we remain focused on controlling future expense growth to ensure that incremental revenue gain support our profitability improvement.
Speaker Change: Okay.
Speaker Change: Slide 20 illustrates our asset quality and reserve trends the increase in non accrual loans at December 31, 2024 was partially the result of a few larger criticized Cree relationships, which importantly are performing is contractually obligated and continue to pay on schedule.
Speaker Change: Accruing past due loans declined to 20 basis points as a pair of prelaunch, which we discussed last quarter were repaid in broad current respectively.
Speaker Change: Net loan charge offs increased from the linked quarter, mainly as a result of two larger Cree and C&I credits.
Speaker Change: During the quarter, our allowance coverage ratio increased three basis points to 107% and stands at the highest level in the past five years.
Speaker Change: We expect the pace of allowance coverage growth slow meaningfully in 2025, supporting the expected provision decline, which I referenced.
Speaker Change: The next slide illustrates the sequential increase in our tangible book value and capital ratios tangible book value increased despite headwinds from the OCI impact associated with our available for sale securities portfolio.
Speaker Change: Our risk based capital ratios increased significantly during the quarter as a result of strong reported earnings the common equity offering and are executed loan sale. We are extremely well position from a capital perspective and have the financial flexibility to execute on our strategic initiatives, while preserving our balance sheet strength in the coming year with that I will turn the call back to the operator to begin Q&A.
Speaker Change: Thank you.
Speaker Change: Certainly as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: One moment for our first question.
Speaker Change: Our first question will be coming from monarch, Australia at Morgan Stanley. Your line is open.
Brian Wilson: Hi, Good morning, This is Brian Wilson, SKU, selling and from a non.
Speaker Change: Can you update us on what impact the shape of the yield curve is having on your NII outlook. I know previously you had talked about mid to high single digit growth.
Speaker Change: Since then we've seen a couple cuts get taken out of the short end of the curve.
Speaker Change: One end of the curve is now higher can you just unpack the impact that that has on your outlook. Thanks.
Speaker Change: Yes, Brian This is Travis thanks for the question. So as we've talked about in the past we are more neutral to the front end of the curve and positively exposed to the longer end of the curve. So the shape of the curve as it stood at the end of the year relative to 930 was more beneficial for our net interest income outlook.
Speaker Change: So that was one of the key drivers of the upwards revision. The other key driver is the funding position at year end was much stronger than it was at 930, we talked about the $1 $7 billion of direct deposit growth that enabled us to pay off $2 billion of broker during the quarter. So we are much better positioned from that perspective, we are also more successful reduce.
Speaker Change: <unk> deposit costs in our customer base in the wake of the fed cuts.
Speaker Change: And so that the combination of those three things sets us up for a better NII outlook for 'twenty five than we had previously discussed.
Speaker Change: That's very helpful. Thank you and then just a follow up is on the updated reserve targets. So you are now targeting a range of one point to 2125 for the end of this year I think previously you had communicated about 125 I was wondering should we should we interpret that range to mean that.
Speaker Change: Your reserve ratio doesn't have to go above 125 beyond this year is that sort of a good normalized reserve ratio for us to think about for valley.
Speaker Change: I think that's correct. So I think the addition of a range that's a little bit below that 125 reflects the slowdown in migration that we saw in criticized assets during the quarter.
Speaker Change: As well as the fact that ultimately we will be transitioning from Cree and into C&I and that's kind of what you see from getting us that 117 today to that slightly higher range at the end of the year.
Speaker Change: But again with the slowdown in migration in criticized assets the river reserve targets, a little bit lower than it had been.
Speaker Change: Appreciate it thank you for taking my questions.
Mark: Thank you Mark.
Speaker Change: Our next question.
Speaker Change: Our next question will be coming from Anthony Elian J.
Speaker Change: J P. Morgan your line is open.
Speaker Change: Hi, Brian just to follow up on the reserves can you talk about the cadence of the reserve build you expect this year should we expect most of the build to happen in the first half or should that be evenly patterned out through this year.
Speaker Change: So I think this is mark CAGR Anthony on the reserve we weren't anticipating.
Speaker Change: There would be a little more growth at the beginning.
Speaker Change: For the year and tapering off through the yen just anticipating how that will flow out.
Okay. Thank you and then my follow up can you talk about the success you've called out in the press release on the direct customer deposit channel and you know that deposits increased about $1. Seven from this segment is this the area you expect to drive most of the deposit growth in 2025. Thank you.
Speaker Change: To be clear, we said direct deposits as a catch all for customer deposit activity. So the $1 7 billion of <unk>.
Speaker Change: Growth was very broad based across the franchise. So branch deposits increased around 4% and our specialty niches increased around 5% and within specialty we continue to see good activity in international and technology. Despite.
Speaker Change: Despite a significant reduction in the rate that we offer in our online channel, we still see growth there.
Speaker Change: And then in the branches, it's been more diverse and broad based its a combination of consumer and commercial and to some degree municipal activity as well and just to add I think one of the things that we've seen is the outcome of some of the positive investments that we've been making in technology and some of the products and services that we've been looking at valley and one of them obviously was the treasurer.
Speaker Change: Solution here and if youll get clients just between third and fourth quarter that used our treasury product deposit balances in those accounts increased about half a billion dollars as well. So we're seeing a real real receptivity towards those individual products and because of the functionality. We are seeing an increase in deposit balance there.
Speaker Change: In addition, we were able to grow net new business accounts about 10000. This year. So it really its comprehensive across the entire balance sheet.
Speaker Change: Yes, thank you for the color.
Speaker Change: Thanks.
Speaker Change: One moment for our next question.
Speaker Change: And our next question will be coming from Chris Mcgratty of <unk>. Your line is open.
Chris Mcgratty: Oh, great. Thanks.
Speaker Change: Given the actions you took.
Speaker Change: We strengthened the balance sheet in 2024, how are you thinking.
Speaker Change: About the medium term ROE potential of the company return on tangible.
Speaker Change: I think from a longer term perspective, I think we gave some highlights as to sort of where we think we're going to end the year at.
Speaker Change: Little north of 11%.
Speaker Change: I think long term, we should definitely be operating north of 15% with an ROA that's above 120, as well and I think those are some of the long term performance targets that we've outlined here and we think we have a good pathway towards us.
Speaker Change: Okay.
Speaker Change: Brian there's a pretty pretty big gap and I guess, how do you bridge that 400 basis points.
Speaker Change: Obviously, I think really starts which is growing customer accounts and what that shifted the balance sheet looks like so.
Speaker Change: Improving margin is going to definitely help we think theres improve noninterest income that's going to come out of some of the initiatives that we've been investing in and obviously managing the operating expenses, which we've been doing a very good job. So a lot through positive operating leverage overall that we think we're in a good capital position.
Speaker Change: So I don't think it's as big as the lift that maybe as what <unk> will look at from the outside Theres a lot of positive tailwind here.
Speaker Change: Yeah.
Speaker Change: Okay, Great and then just coming back to the loan growth Guide I think in your prepared remarks, you talked about.
It was mid mid teens C&I growth is.
Speaker Change: I guess, maybe I'd love to hear a little bit more color on that and then what any portfolio purchases be considered that's a pretty good growth rate relative to some slowing.
Speaker Change: Some of your peers.
Speaker Change: Yes, Chris This is Travis thanks for the question I think our guide on C&I was high single digits, maybe low teens not not mid teens. Okay. Thank you for your zoom out and consider what happened in 2024, I mean, we grew C&I loans and 700 million. This year, but that includes a $300 million headwind from the sale of our commercial premium finance.
Speaker Change: Business. So if you if you exclude that I mean, we would have grown on a net basis of $1 billion in C&I and kind of organic owner occupied Cree would've grown another $500 million and it looks like it's up $1 6 billion. When you look at the loan table, but we did reclassify some investor Cree into that bucket mid year. So between.
Speaker Change: NII in kind of an owner occupied Cree 'twenty 'twenty four were up 1 billion and a half and then residential and consumer would've combined for another couple of hundred million dollars as well. So just kind of with no additional growth tailwind I mean, you can replicate those types of results and then consider that the C&I pipelines up over $600 million at 12, 31, 24 versus a year ago.
Speaker Change: And so we look we're seeing good trends across the franchise, both geographically and in terms of our specialty niches healthcare and fund finance are two areas that have been key contributors to growth in 'twenty four and we expect continued momentum there in 'twenty five.
Speaker Change: Alright, that's great. Thanks, Rob.
Speaker Change: And as a reminder, if you would like to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Our next question will be coming from Matthew Breese with Stephens. Your line is open.
Hey, good morning.
Good morning, I was hoping to start just on the cash position of the balance sheet a bit elevated and I was hoping you could help me out with the deployment timelines strategy and.
Speaker Change: And then second but related securities assets have been steadily climbing now at 11% of total assets, where do you want that to be where do you want to securities portfolio to be as a percentage of assets.
Speaker Change: Yes, Matt this is travis thanks.
Speaker Change: The cash was elevated at the end of the year in the US for very good reason right. We talked about the core deposit growth. We also had the net proceeds from the loan sale and the equity offering as we tried to put those to work as much as possible in terms of paying off excuse me paying off maturing broker deposits and obviously, we added about $700 million net to the securities portfolio, but we're still left in an elevator.
Speaker Change: Cash position. So we do expect that cash will normalize throughout the year, but the first quarter from a loan growth perspective is likely to be a little bit slower. So it is possible that the.
Speaker Change: That cash remains somewhat elevated early in the year and then gets put to work as the year proceeds.
Speaker Change: From a securities perspective, and we've grown the portfolio about I think $1 billion five $2 billion last year, it's been significant.
Longer term, we appreciate and acknowledge that it will continue to increase as a percentage of assets, but that played out over a relatively long period of time so.
Speaker Change: We're factoring in today call. It 500 plus million dollars of growth this year in our securities portfolio.
Speaker Change: To begin that process.
Speaker Change: Great and then.
Speaker Change: I was hoping you could provide an update either.
Speaker Change: Year end or in January of the total cost of deposits and maybe help us out with some of your deposit beta expectations for this year.
Speaker Change: Yes, our December average cost of total deposits was 287%. So that was about seven basis points lower than the average for the quarter I would say, though that that doesn't capture I mean in December we paid off a $1 billion of brokered.
Speaker Change: I don't think you'd get the full benefit in that amount and you also had the fed cut occur pretty late in the month of December. So I don't think you picked up much benefit there either so the <unk>.
Speaker Change: Model assumes a 60% downside beta on interest bearing non maturity deposits. When you factor in noninterest you get to about 50%.
Speaker Change: And so we've actually outperformed that in the wake of the first three fed cuts of the cycle and so to the degree we continue to outperform there would be additional NII upside relative to the guidance that we've laid out.
Speaker Change: Great and then last one IRA.
IRA Robbins: I Couldnt help but notice you mentioned, a return to where I should say.
Speaker Change: Ah rekindle focus on retail.
Branch banking, perhaps adding some branches.
Speaker Change: Envision any sort of market footprint expansion, if so where if not where do you intend to add more branches and is that part of the expense guidance.
Speaker Change: Guidance for 25%.
Speaker Change: I think the numbers that you baked in for what we're looking at in within the retail footprint I think theres a lot of opportunity just sitting within the new Jersey market Theres been some tremendous disruption with some of our competitors here in their ability to really reinvest back into this footprint. So we've seen strong strong growth just in our footprint here I think in New Jersey, just account growth.
Speaker Change: About 4%.
Speaker Change: In 2024, so there is a pretty good tailwind there on the consumer side and not even to mention what we're doing on the small business side.
Speaker Change: In Florida, probably there is an opportunity to maybe think about what branch expansion looks like I think we just opened a new one in Staten Island, and as Travis as I referenced earlier, we had the one in Beverly Hills office. So we are seeing real real positive outcomes by reinvesting in some of those branches.
Speaker Change: But that said I think there's a lot of opportunity just in our core footprint here.
Speaker Change: Great I appreciate you taking all my questions. Thank you.
Speaker Change: Thanks, Matt.
Speaker Change: And I am showing one last question on Momo.
Speaker Change: Yes.
Speaker Change: Our next question will be coming from Frank Schiraldi of Piper Sandler Your line is open Frank.
Frank Schiraldi: Good morning.
Speaker Change: Just.
Speaker Change: <unk> wondering if you could your.
Speaker Change: Your level of confidence in getting to that.
Speaker Change: ROA of 1% by the end of the year you mentioned.
Travis Lan: Travis you mentioned.
Speaker Change: A steeper yield curve, obviously, helping the.
Speaker Change: The NII outlook.
Travis Lan: Is that the.
Speaker Change: The greatest risk.
Speaker Change: We get longer term rates coming down or do you feel like theres some offsets.
Speaker Change: Maybe delay investment or so forth.
Speaker Change: You still get to that 1% level by the fourth quarter.
Speaker Change: Yeah, Frank I appreciate it look I think the NII guidance range that we gave I mean, the implied curve is candidly the upper end of that range I mean, we more conservative we believe the lower mid point of that.
Speaker Change: A degree that rates pull back, but that's still captures a range that would get you to a 1% plus ROA at the end of the year any other consideration. There is the provision guidance that we've given is not necessarily linear so we anticipate that charge offs and provisions will be higher in the beginning of the year and then taper off as the year goes on but still getting within the <unk>.
Speaker Change: Guidance range that we've provided so we think a combination of those things primarily the reduction in the provision as the year plays out as well as the net interest margin expansion as the year goes on.
Speaker Change: Our expectation that we can be exiting 2025.
Speaker Change: With an ROA above one.
Speaker Change: And I think just to reiterate a little bit what <unk> mentioned earlier right in the guide that we're giving you on where the NII is going to end up falling we're effectively only using 80% betas versus what we actually received or what we actually recognized just this last quarter.
Speaker Change: That said, we were able to be very aggressive in the deposit pricing and we also saw one of our strongest deposit growth quarters ever at valley. So that's something that makes me feel really really confident about what we're seeing here and being able to really grow deposits. While at the same time pushing through significant deposit cost reductions is something that that.
Speaker Change: That we haven't been able to really do here and we've seen tremendous success.
Speaker Change: Great.
Speaker Change: Alright, thank you.
Speaker Change: Okay.
Speaker Change: Thanks, Bryan I would now like to turn the conference back to IRA Robbins for closing remarks.
Speaker Change: I just want to thank everyone for taking the time to spend with US. This morning, and if I were to talking to you again next quarter. Thank you.
Speaker Change: And this concludes today's conference call. Thank you for participating you may now disconnect.
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