Dave Antolik: Yes, I don’t see the growth being impacted significantly by changes in rates, unless there is a dramatic reduction in term rates which might cause some refinance activity. I think we understand our customers, we know where they’re headed. Our job is to help them achieve their goals and then adding to the team and making sure that we’re focused on rounding out the relationships is what we’re focused on. So I wouldn’t put two and two together and get four relative to loan growth and a reduction in rates.
Operator: Your next question comes from the line of Matthew Breese from Stephens Inc.
Matthew Breese: Just a few follow ups for me. The first one is just what proportion of the loan portfolio and what proportion of deposits reprice immediately?
Mark Kochvar: So on the loan side, it’s kind of low 40s that would reprice immediately. On the deposit side, on the immediate side, there isn’t very much at all. At one point, we had a product that was tied to fed funds but we suspended that or changed that going into this cycle. So we have, as Dave had alluded to, made a lot of — we’ve done some exception pricing. So a lot of those we feel like are, we’ll reprice down as rates go down, but it’s more on a one by one basis that we’ll go through and work through that book. Most of our facilities are going to be borrow — we do have a fair amount of brokered deposits in all of our borrowings. All of those, there’s $800 million of that, that will reprice down pretty much immediately though.
Matthew Breese: And then excluding the broker, what are expectations for core deposit betas as rates decline?
Mark Kochvar: As rates decline?
Matthew Breese: Yes, on the way down.
Mark Kochvar: I mean we haven’t fully modeled that out. I think we still have a little bit of ways to go. Even if ever rates were to move down, there’s probably going to be a little bit of a push and pull and not — certainly not all of our customers have gotten higher rates from where they were yet. So I think we’ll be — the response from the net deposit side on that initial rates down, the first couple of cuts will probably have not a very high down beta, I would expect.
Matthew Breese: And then last one for me. Every incremental quarter, we get a little closer to that $10 billion threshold. And I was curious, is it in your budget to cross $10 billion this year, or 2025? And then just remind us all the kind of necessary details in terms of expenses, Durbin and whether you plan to cross organically or through a deal?
Chris McComish: Well, you could just map out our expected asset growth and you could see it could be within 2024, but certainly by the end of 2025. Mark has the Durbin number that we’ve calculated in the past, $6 million, $7 million approximately. I would say that 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 cross and then you go do the work. You prepare to do that from an additional regulatory oversight, three lines of defense, risk management standpoint, all those 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’s no big investment that’s needed from the standpoint of how we run the place on a daily, weekly, monthly basis that’s going to change dramatically.
As it relates to organically or inorganic, we have a lot more control over the organic growth and that’s where we’re focused, while at the same time, doing everything we can to prepare for inorganic opportunities.
Operator: Your next question comes from the line of Daniel Cardenas from Janney Montgomery Scott.
Daniel Cardenas: Can you remind me how much cash flow is generated each quarter from your securities portfolio? And is that going to be put back into the securities portfolio or are you going to use that to fund expected loan growth?
Mark Kochvar: We’ll 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 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. On a quarterly basis, I think we’re in kind of the $30 million to $40 million per quarter range of cash flow coming back. But as I said, we’ll probably — we’ll reinvest that into the bond portfolio.
Daniel Cardenas: And maybe just going back to the M&A question that you had earlier. Geographically, 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 McComish: No. We’ve talked about, Dan, our core and contiguous markets. So we love the geography that we’re in, which is inclusive of the State of Pennsylvania and Ohio, and the marketplace is one that we know very well. And so that’s kind of that general geography relative to our headquarters here and would be where we’re focused.
Daniel Cardenas: And would this be more for deposit place, will you be looking for like a deposit heavy institution?
Chris McComish: Yes, whether it’s deposit place or deposit heavy, I think typically, in an acquisition, the franchise stops and starts with the deposit franchise and the quality thereof that if a customer defines their relationship by where they have their deposits, that’s where you need to start to understand the customer base that you’re picking up. It may be additional infill in a geography or expansion into a geography that would — an area that we already know well, we just want greater share or greater presence. Those things would go into it, strategic fit with our organization, that would make a lot of sense and then obviously, a good understanding of the asset quality would be a driver as well. But most opportunities like this do start on the deposit side of things, because, again, that represents the quality and the potential long term earnings power and the additive nature for the enterprise to our company.
Operator: There are no further questions at this time. I would like to turn the call over to Chief Executive Officer, Chris McComish for closing remarks.
Chris McComish: Okay. Well, thanks. And listen, we really appreciate everybody’s attention and your thoughtful questions and engagement. We certainly are available if you’ve got any follow-up at all and want to dialog further. Again, we’re really, really proud of 2023 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.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
