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Provident Financial Services Inc  (NYSE:PFS)
Q4 2018 Earnings Conference Call
Feb. 01, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to the Provident Financial Services Incorporated Fourth Quarter Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please also note, today's event is being recorded.

At this time, I'd like to turn the conference call over to Mr. Len Gleason, Investor Relations Officer. Mr. Gleason, please go ahead.

Leonard G. Gleason -- Senior Vice President and Investor Relations Officer

Thank you, Jamie. Good morning, ladies and gentlemen. Thank you for joining us today. The presenters for our fourth quarter earnings call are Chris Martin, Chairman, President and CEO, and Tom Lyons, Executive Vice President and Chief Financial Officer. Before beginning their review of our financial results, we ask that you please take note of our standard caution as to any forward-looking statements that may be made during the course of today's call. Our full disclaimer can be found in this morning's earnings release, which has been posted to the Investor Relations page on our website, provident.bank.

No, I'm pleased to introduce Chris Martin who will offer his perspective on the fourth quarter. Chris?

Christopher Martin -- Chairman, President and Chief Executive Officer

Thanks, Len, and good morning, everyone. Provident's record quarterly and annual results continue to reflect the successful implementation of our strategic objectives. Earnings for the quarter were $35.8 million or $0.55 per share versus $0.30 per share for the quarter ended December 31st, 2017.

Full year-over-year earnings increased by more than 26%, and we have continued to benefit from our well-positioned balance sheet, our deposit and loan pricing discipline, and our selective restraint when competing with banks, life insurance companies, and other financial intermediaries. Our annualized return on average asset and average tangible equity for the quarter were 1.46% and 15.27%, up from 80 basis points and 8.69% from the same period in 2017.

Our total assets remain below the $10 billion threshold through enhanced regulatory oversight and Durbin limit on debit card fee income at $9.7 billion at year-end 2018, as our loan levels remain static.

Loan payoffs muted strong loan originations and line of credit advances of $3.16 billion for the year. We are well positioned for net loan growth in 2019, albeit at low to mid-single digit levels as we anticipate additional payoffs. The pipeline remains robust and consistent and we continue to steer away from riskier lending, focusing on portfolio optimization that meets our risk-adjusted returns and does not adversely impact the quality of our loan portfolio.

Asset quality continued to improve with total non-performers representing 0.35% of total loans at 12/31/18. Foreclosed assets were only $1.6 million at year-end versus $6.9 million at the same period last year. Net charge-offs for the quarter were just 1 basis point and we are not seeing any adverse trends that would portend a significant deterioration in asset quality as the economy appears somewhat stable, and we remain optimistic, but cautious.

Total deposits increased during 2018 by $116 million with CDs making up the bulk of it, as they represented a cheaper source of funding than borrowing. And we really haven't increased our core deposit pricing on traditional bank accounts appreciably, while many of our liability sensitive competitors and those with outsized growth targets struggled to fund their operations. And we continue to forecast that once the Fed stops increasing rates, we should see a stabilization in deposit betas.

As mentioned in this morning's release, our Board approved a 9.5% increase in our regular cash dividend and also declared a special cash dividend of $0.20 per share. These actions reflect our Board's confidence in our ability to generate strong earnings and to continue to enhance shareholder value.

And there was some activity in stock buybacks during the fourth quarter when the market came under pressure. We still have over 2.5 million shares remaining in our current buyback approval. And we also announced our agreement to acquire a successful and seasoned registered investment advisor in Manhattan with approximately $750 million in assets under management, which will elevate our Beacon Trust business to over $3 billion in total AUM upon closing. And we anticipate we will close this transaction early in the second quarter of the year.

Net interest income was again a record for PFS this quarter. The margin performed well, increasing 6 basis points from the trailing quarter to 3.44%, and I note that there are no prepayment fees included to skew the results. We anticipate continued modest growth in our NIM for 2019. Non-interest income increased $2.3 million for the quarter, and Tom will provide more details.

The quarter included some additional expenditures for technology and investments in improving the customer experience. We are enhancing the use of analytics in terms of really understanding our competitors, and more importantly, our customers' banking needs and expectations. The digital platform is key to competing effectively in the future. So our investments in this channel must deliver a more personalized relationship with our customers. While we continue to expand resources on technology, we also are focused on improving our operational efficiencies, reviewing workflows, evaluating our staffing models, and deploying robotic process automation where applicable.

As for M&A, you have heard it from us many times. We continue to seek out acquisitions that will enhance net interest income, fee income, and our management team. It always comes down to the best opportunity, the right fit, and earnings accretion with a reasonable tangible book earn-back period.

We believe the outlook for growth in the US economy is fundamentally strong, but volatility will continue as geopolitical anxiety adding to the challenge. GDP continues to be strong; unemployment, the lowest in almost a generation, and at least until the government shutdown, improving consumer confidence. Businesses appear to be healthy and their balance sheet and cash flows are the strongest they have been in years. And while New Jersey and eastern Pennsylvania have their own challenges, we believe they represent some of the best markets in the country and provide ample opportunity for continued growth.

At this time, I would like to ask Tom to provide you with more details on the quarter. Tom?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Thank you, Chris, and good morning, everyone. As Chris noted, net income was a record $35.8 million for the fourth quarter of 2018 or $0.55 per diluted share compared with $35.5 million or $0.54 per share for the trailing quarter and $19.5 million or $0.30 per share for the fourth quarter of 2017.

Current quarter earnings were driven by record revenue of $93 million as interest income and net interest income, both achieved record levels. Our net interest margin expanded 6 basis points versus the trailing quarter as our earning asset yield increased 12 basis points, while the cost of interest bearing liabilities increased 7 basis points. Further helping the margin, average stockholders' equity increased $19 million for the quarter. Note that our reported margin is core with loan prepayment fees excluded and reported as non-interest income.

Pre-tax, pre-provision earnings were $44 million, an increase of approximately 17% when compared with the fourth quarter of 2017. Current quarter results included a $2.2 million pre-tax gain on the sale of Visa Class B shares and a $1.9 million tax benefit from a cost segregation study on certain capital improvements.

Year-end loan totals increased $22 million from September 30th as loan originations were 21% better than the trailing quarter, but growth was again constrained by a high rate of payoffs and maintenance of our credit and pricing discipline. The pipeline remains strong at $972 million, and while the pipeline rate has decreased 1 basis point since last quarter to 4.94%, it still exceeds the loan portfolio rate of 4.49%. Based on our strong loan pipeline, 89% core and non-interest bearing deposit funding, and the variable rate nature of many of our assets, we anticipate further modest expansion of our net interest margin in the near term.

Credit metrics on the loan portfolio were strong and non-performing assets saw net resolutions of $7.3 million during the quarter, declining to 28 basis points of total assets at quarter end. Provision for loan losses was $1.8 million for the quarter, while annualized net charge-offs were just 1 basis point of average loans. As a result, the allowance for loan losses to total loans increased to 77 basis points from 75 basis points at September 30th, while the allowance as a percentage of non-accrual loans increased to 216% from 185% at September 30th.

Non-interest income declined by 300,000 versus the trailing quarter to $15.6 million as decreases in bank-owned life insurance income, loan level swap income, gains on loan sales and wealth management income were largely offset by a $2.2 million gain on the sale of Visa Class B shares. Non-interest expenses were an annualized 2.01% of average assets for the quarter.

Expenses increased by $2.7 million to $49.4 million versus the trailing quarter, primarily as a result of increased consulting costs related to process improvement initiatives, data processing, risk management, regulatory and tax compliance as well as compensation and benefits, legal, and other expenses.

Our effective tax rate fell to 14.3% for the quarter, largely as a result of a $1.9 million benefit recorded from a recently concluded cost segregation study and certain capital improvements. We are currently projecting an effective tax rate of approximately 20% for 2019.

That concludes our prepared remarks. We'd be happy to respond to questions.

Questions and Answers:

Operator

Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Our first question today comes from Mark Fitzgibbon from Sandler O'Neill & Partners. Please go ahead with your question.

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

Hey, guys. Happy Friday.

Christopher Martin -- Chairman, President and Chief Executive Officer

Hey, Mark.

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

First question, Tom, I apologize if I missed this, but did you give any comments on the outlook for expenses?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

I didn't go outlook. No, Mark. I think it's going to remain about this level in the first quarter. While some of the expenses we incurred in the fourth quarter are not expected to recur, they're going to be largely offset by the typical first quarter pickup in payroll taxes, occupancy expenses around utilities and snow removal, and again, some continued expenses around growth initiatives.

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

Okay. So there was a pretty good --

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

So I'm looking for --

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

I'm sorry.

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

I'm looking for about $50 million for the quarter, about $204 million for the year, assuming the wealth deal closes.

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

Okay, great. It looked like this quarter in other expenses, they were up quite a bit. Was there anything unusual in there or is that some of the building costs and such?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Yeah. There is a lot of little things in other. I guess the biggest mover that I could identify would be on the consulting side of things. There's expenses related to the cost segregation study, which obviously provided a nice benefit. There were some regulatory enhancements that we made as well as CECL work that was being done. We had a payroll implementation, kind of scattering of things that -- some of which we had some discretion over the timing over and we chose to accelerate some of those investments to correspond with the gain that we took on the sale of the Class B Visa shares.

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

Okay. And then could you update us on where you are in terms of preparation for crossing $10 billion?

Christopher Martin -- Chairman, President and Chief Executive Officer

Well, this is Chris. We've been spending money with consultants with -- again, looking at every little thing that can happen. Right now we're -- with payoffs, we're going to a different direction. It's not that we don't want to go through. We are preparing. We are also having regulators here on a regular basis, so we are being treated as if we're $10 billion, and we're working with them to make sure that we're able to show the progression. We have definitely spent money on the risk calibrations and more on policies, documentation as we go forward. Other than that, Durbin is what it is and same with the big bank FDIC insurance, those will be incurred when and if we cross.

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

So would you wait until a deal presents itself or would eventually you make a decision to cross without an acquisition?

Christopher Martin -- Chairman, President and Chief Executive Officer

The answer would be yes, not being smart, but it would be either-or. We are not saying we wouldn't do a deal to go over $10 billion. That's not the case at all. If we have to go organically because nothing hits the hurdles that we'd expect in an M&A deal, we will just go through it. Obviously getting some scale to offset those expenses would be a preferable way to go through, but if it happens organically, we will.

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

Okay. But borrowing that, you probably hold the balance sheet below $10 billion for at least a couple of quarters and until the opportunity presents itself?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Mark, I think as we approach the end of the year, if we're not going to be at about $10.2 billion, we would probably try to hold back and remain under just to save the extra year on Durbin.

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

Okay. Great. Thank you.

Christopher Martin -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Collyn Gilbert from KBW. Please go ahead with your question.

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

Thanks. Good morning, gentlemen.

Christopher Martin -- Chairman, President and Chief Executive Officer

Good morning.

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

If we can just go back to the expense discussion for a minute, obviously you guys came in higher than what you all had originally projected for the quarter. And I know you had indicated you accelerated some of those expenses because of a Visa gain. But overall, it looks like expenses are settling out higher in 2019 than perhaps what you would have anticipated. Number one, is that correct?

And then number two, if so, is that -- do we attribute this ramp-up really to prepping for $10 billion or are there other things going on? I don't -- I guess I'm just curious was there a strategic change or something that occurred that's now causing expenses to run higher than where you would have anticipated in the third quarter?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Yeah. I don't think it's a change, Collyn, but it is both. I guess, we've been calling them growth initiatives. It's $10 billion, but it's not strictly compliance. There's investments being made in data analytics, workflow evaluation, things to try and enhance capacity that will give us a return going forward, but they require some upfront investment, mobile and online banking enhancements and as well as making sure compliance keeps pace with our growth, and then CECL in addition. So all of those things, I think, have been expected all along. Again, some of it got pulled forward a little bit because we had that gain available to us, but I don't think we're materially different than what our expectations were strategic plan wise.

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

Okay. Okay, that's helpful. And then in terms of -- you'd indicated that $204 million with Tirschwell included in that number. Can you just give us a sense of what fees -- what you're kind of expecting on the fees side then with Tirschwell coming into the fold?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Yes. 3.4 is expenses. I think the fees are about 4 and change, let's see if I could find here, 4.8.

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

Okay, that's helpful. And then just back to the NIM, if you could offer what your -- kind of what your outlook is there, I mean, it's continued to do -- hold in very well. I know, Chris, you had indicated you're holding the line on the pricing for your core deposits, but just sort of your outlook there, maybe Tom for the NIM.

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Sure. And just to clarify on the wealth acquisition, that's -- 2019, that's not a full-year annualized. So that's about three quarters of a year at 4.8, assuming we close the second quarter.

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

Okay. That's helpful. Thanks.

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

As far as NIM goes, I think we're looking for 1 to 2 basis points a quarter. Obviously the sensitivity to that assessment is what happens on the funding side of things, a lot of which is driven by the Fed and competitors, but assuming that we're right in our projections, looks like 1 to 2 basis points a quarter.

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

Of expansion?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Yeah.

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

Continue expansion, OK. Okay. That's helpful. Okay. And then just finally on the tax rate. So that's a huge delta, 20% from 27%. Can you just talk about what's going into your assumptions there to be able to lower that?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Sure. 27% was always the max based on changes in the state rate, particularly around treatment of real estate investment trust. The state has issued another -- what do they call it, state taxable number dash (ph) 86 on January 3rd. They still haven't concluded definitively whether the REITs will be part of the combined group. The way the law is currently written, we believe the REIT still benefits from the structure and therefore the tax rate stays about the same at 20% effective.

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

Okay, perfect. All right. I will leave it there. Thanks, guys.

Christopher Martin -- Chairman, President and Chief Executive Officer

Thank you.

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from Russell Gunther from D.A. Davidson. Please go ahead with your question.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Hey, good morning, guys.

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Good morning, Russ.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

I just want to follow up on the loan growth conversation. you got comments around low to mid single digits pipelines a little bit lower coming in to 1Q '19. So could you share with us sort of what the delta would be for your ability to hit the high end of that guide?

Christopher Martin -- Chairman, President and Chief Executive Officer

Well, this is Chris. The biggest challenge has been the payoffs. It's not for getting a decent flow of good loans. The problem is that payoffs keep coming in, which shows through quality of the portfolio that they're very refiable (ph) by other institutions. We are seeing more in the bank space of late taking us out and I think some of those structures and/or pricing is fairly aggressive. So that is the backdrop of as much work as we can do, it takes a couple of loans that go away. We've seen them in the first month of the year coming in a little bit higher than anticipated. So it just starts you off a little behind as we go in. So I don't know that we're -- we'd love to say we're going to get to the high end of that, but we're going to definitely try. We can slow down some of the payoffs, so.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Got you. Okay. No, I appreciate your thoughts there. And then on the RIA acquisition that's scheduled to close, it looks like some decent earnings accretion there. Kind of what's the opportunity set to do more of those going forward?

Christopher Martin -- Chairman, President and Chief Executive Officer

Well, we -- it's not we're not trying. There's certainly opportunities. They have to kind of fit the metric and fit the mold, so to speak. We have a very good platform with Beacon. We continue to look at contiguous and there are -- we think there'll be more coming in that space. You just have to match up to what we're trying to accomplish and mirror what they are trying to accomplish at the same time. We are not just a cash-out. We want to get people that want to stay involved and help transition the customers over. So we have the capacity to do more, but we always like to get everything under the tent, but we'll continue to look at that space absent any bank M&A that might show up.

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Yeah. I think we would like to continue to diversify that revenue stream. I think there's been something being looked at pretty much continuously for the last several years. We certainly have the capital flexibility to do more of that and the desire to do that.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Got it. Okay, great. And then just -- thanks, guys -- to round out that capital deployment conversation, Chris, I heard you loud and clear you'd continue to look at depository deals. Maybe just a reminder for us in terms of what an ideal target there would look like for you.

Christopher Martin -- Chairman, President and Chief Executive Officer

Well, I think certainly somebody that's in market or contiguous. It can be smaller, doesn't have to be in substance and size. I think when we look at Pennsylvania, we'd love to get another -- a little more space in there. We do cover New Jersey fairly well. And I think we just want to make sure that the organization has really good management and solid fundamentals and we can build on that. So I think that anything in the area we don't seem to think about. We're leapfrogging to other markets that are completely out of our sphere.

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Okay, great. Well, that's it from me. Thanks, guys.

Christopher Martin -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Matthew Breese from Piper Jaffray. Please go ahead with your question.

Matthew Breese -- Piper Jaffray Companies -- Analyst

Good morning.

Christopher Martin -- Chairman, President and Chief Executive Officer

Good morning.

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Good morning.

Matthew Breese -- Piper Jaffray Companies -- Analyst

On the tax rate, you said there was another (inaudible) in January and it was unclear if -- or not definitive if the REIT was still protected. So just curious, is your read that, politically speaking, that the tax rate stuff is done at this point and it's -- the interpretation is that you're protected or could they come back to this and swing the pendulum back against you?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

We are in compliance with current law and the law could change, I guess, at any time as always, but right now the position is that the REIT benefits still endure.

Matthew Breese -- Piper Jaffray Companies -- Analyst

Got it. Okay. And then going back to the expense commentary, thinking about the other expense line, I know there's some investments, legal consulting in there. How long do you expect that to last? Is that more of a catch-up through 2019 or should we just think about that expense line remaining elevated through 2020 as well?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

No, I think legal will probably come down as we see less in the way of asset recovery expenses. Those were a little bit elevated in Q4. The other investments, regulatory compliance almost never goes down, trying to think what else is in here. The process improvement initiatives that we're going through, that will have an end to it over the course of this year and offsetting that, we should see revenue benefits accrued during the course of the year as well. Technology, data analytics, I think that's just you have to establish what percentage of your revenues you want to devote to continue to work on the customer experience and what the market demands.

Matthew Breese -- Piper Jaffray Companies -- Analyst

Right. And could you give us some examples of the areas that needed investments and what the revenue on the other side would -- what that benefit would be?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

On the process improvement side of things, I think most of the revenue comes from freeing up excess capacity and some cost saves in terms of personnel through attrition over time, new staffing model being evaluated for the branches, physical location evaluation something we always do. So those are places where you pick up capacity. On the data analytics side, better information should give you better decision making, which should drive greater revenue growth, and we're spending some money there.

Matthew Breese -- Piper Jaffray Companies -- Analyst

Okay.

Christopher Martin -- Chairman, President and Chief Executive Officer

Yeah, Matt, this is Chris. At the end of the day, when you -- you know, Provident, if we're spending money, we're going to try to figure out a way to save money on the backside of that because that's kind of how we've always run the business.

Matthew Breese -- Piper Jaffray Companies -- Analyst

Understood, understood. Okay. I think -- and Chris, in your opening comments, you noted that with the Fed pausing, you would expect deposit betas to stall a little bit. Is there any indication with the latest message that competition has started to ease at all?

Christopher Martin -- Chairman, President and Chief Executive Officer

Little early, though in reviewing other people's comments, I think everybody is kind of hoping it slows down. New Jersey though, there are still a lot of people trying to fund their pipelines and their loan growth and the only place they can get it is normally through some higher rates whether it be on their core accounts or on the CD levels. It's tough to generate non-interest-bearing deposits unless you're generating a lot of C&I and/or commercial relationships. So I think it will continue albeit at a slower pace.

Matthew Breese -- Piper Jaffray Companies -- Analyst

Understood. Okay. That's all I had. Thanks for taking my questions.

Christopher Martin -- Chairman, President and Chief Executive Officer

Thank you.

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Our next question comes from Erik Zwick from Boenning & Scattergood. Please go ahead with your question.

Erik Zwick -- Boenning & Scattergood Inc. -- Analyst

Good morning, guys.

Christopher Martin -- Chairman, President and Chief Executive Officer

Good morning.

Erik Zwick -- Boenning & Scattergood Inc. -- Analyst

First maybe just on loan growth, and I appreciate the comments you made previously, especially with the -- in regards to paydowns. But as I'm thinking about origination volumes, just looking at what's in the press release, they were down year-over-year about 15%. So kind of, one, curious if that was a reflection of market demand or maybe competitors offering deals at pricing and structure that you were comfortable with. And then I guess, what is your expectation for origination volume in '19 versus '18?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Yeah. I'll let Chris jump in on the competitive environment and the forward-look, but I do want to point out the fourth quarter of last year was extraordinary. If you're looking year-over-year Q4, that was the highest level of originations, I think, I can recall ever seeing here. So we are down about 11% versus Q4 2017, but up 21% versus Q3 of '18 in terms of origination activity exclusive of line of credit advances, so true originations, meaning including renewals and new money on modifications.

Christopher Martin -- Chairman, President and Chief Executive Officer

Yeah, I think -- this is Chris. From the standpoint of structure, we see a lot of things going on that we would probably not do. We see our 20-year swaps with a four-year interest-only. We've seen a lot of no-guarantees on loans that should have partial guarantees. So we are kind of holding back and not allowing the structure unless it really is compelling and the people that we know are -- have very good reputations with us and others, that we are going to stick to where we are in that regard. The only place we could probably play would be in pricing, and even then, we are seeing some deals that we would quote at LIBOR plus 200 and they're being done at LIBOR plus 120. So the people -- the incumbent is very defensive on keeping their book of business, so they are very aggressive, and I think you lead with your chin sometimes on those and we think that some of them aren't really worth the risk. Not that we are saying that everything is perfect in the portfolio, but we think that we are very discerning in how we look at credit and how we see the returns from an equity return basis for our stockholders.

Erik Zwick -- Boenning & Scattergood Inc. -- Analyst

That's helpful. Thank you. And then on the buyback, you mentioned 2.5 million shares remaining in the current authorization. And I think it's about $13 million repurchased in 4Q. Just curious about your appetite and potentially price sensitivity for additional buyback going forward. Would we need to see a pullback like we did in the fourth quarter or would you potentially look to be involved without a significant sell-off like that?

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

No, I think pricing plays a role in that. We're looking for a reasonable earn-back on a risk-free basis, so obviously longer than you would on an -- in an external deal, but we look at value creation relative to multiples of tangible book and earnings, and what the forward earnings accretion brings.

Erik Zwick -- Boenning & Scattergood Inc. -- Analyst

Got it. Thanks for taking my questions.

Christopher Martin -- Chairman, President and Chief Executive Officer

Thank you.

Operator

And ladies and gentlemen, at this time, I am showing no additional questions. We'll end today's question-and-answer session. I'd like to turn the floor back over to Chris Martin for any closing remarks.

Christopher Martin -- Chairman, President and Chief Executive Officer

Well, we thank you for joining us on our call today and we look forward to a very positive 2019 and to warmer temperatures. Certainly have a good day. Thank you.

Operator

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.

Duration: 29 minutes

Call participants:

Leonard G. Gleason -- Senior Vice President and Investor Relations Officer

Christopher Martin -- Chairman, President and Chief Executive Officer

Thomas M. Lyons -- Executive Vice President and Chief Financial Officer

Mark Fitzgibbon -- Sandler O'Neill & Partners LP -- Analyst

Collyn Gilbert -- Keefe Bruyette & Woods Inc. -- Analyst

Russell Gunther -- D.A. Davidson & Co. -- Analyst

Matthew Breese -- Piper Jaffray Companies -- Analyst

Erik Zwick -- Boenning & Scattergood Inc. -- Analyst

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