Participants

Christopher Holmes; President, Chief Executive Officer, Director; FB Financial Corp.

Michael Mettee; Chief Financial Officer; FB Financial Corp.

Travis Edmondson; Chief Banking Officer; FB Financial Corp.

Stephen Scouten; Analyst; Piper Sandler

Brett Rabatin; Analyst; Hovde Group

Russell Gunther; Analyst; Stephens, Inc.

Catherine Mealor; Analyst; Keefe, Bruyette & Woods

Steve Moss; Analyst; Raymond James

Presentation

Operator

Good morning, everyone. This is the conference operator. We thank you for dialing into the FB Financial Corporation's fourth-quarter 2024 earnings conference call. The call will begin momentarily. Once again, we do thank you for joining. Please stay on the line. The call will begin momentarily. Thank you.
Good morning, everyone, and welcome to the FB Financial Corporation's fourth-quarter 2024 earnings conference call. Hosting the call today from FB Financial are Chris Holmes, President and Chief Executive Officer; and Michael Mettee, Chief Financial Officer. Also joining the call for the question-and-answer session is Travis Edmondson, Chief Banking Officer.
Please note, FB Financial's earnings release supplemental financial information. And this morning's presentation are available on the investor relations page of the company's website at www dot firstbankonline dotcom and on the securities and exchange commission's website at www.sec.gov.
Today's call is being recorded and will be available for replay on FB Financial's website. Approximately an hour after the conclusion of the conference call at this time, all participants have been placed in a listen-only mode.
The call will be open for questions after the presentation during this presentation. FB Financial may make comments which constitute forward-looking statements under the federal securities laws.
Forward-looking statements are based on management's current expectations and assumptions and are subject to risks uncertainties and other factors that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements.
Many of such factors are beyond FB Financial's ability to control or predict and listeners are cautioned not to put undue reliance on such forward-looking statements.
A more detailed description of these and other risks that may cause actual results to materially differ from expectations is contained in FB Financial's periodic and current reports filed with the SEC including FB Financial's most recent form 10-K except as required by law FB Financial disclaims, any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise.
In addition, these remarks may include certain non-GAAP Financial measures as defined by SEC regulation. G A presentation of the most directly comparable GAAP Financial measures and a reconciliation of the non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release supplemental financial information.
And this morning's presentation which are available on the investor relations page on the company's website at www dot First Bank online dotcom and on the S ECs website at www.sec.gov.
I would now like to turn the floor over to Chris Holmes, FB Financial's President and CEO.

Christopher Holmes

All right. Thank you, Jamie. And thank you for joining the call this morning. We always appreciate your interest in FB financial for the quarter. We reported EPS of $0.81 and an adjusted EPS of $0.85 per share. We've grown our tangible book value per share excluding the impact of A OC I at a compound annual growth rate of 12.9% since our IPO in 2016 on a full year basis, we reported EPS of $2.48 or adjusted EPS of $3.40 which represents a year over year increase of 13%.
Four year pretax pre provision net revenue was $158.7 million or $217.1 million an adjusted basis, which represents a 20% year over year increase.
These results were driven by our team's focus on growing core banking relationships covered with our continued focus on balance sheet optimization and managing our expenses for the full year. We grew total assets by $553 million or approximately 4.4% funded through the growth of our quarter deposit balances of $343.5 million or about 3.3%.
The themes I've emphasized over the past several quarters have circled around the strength of our operating foundation, including our solid capital and liquidity positions while maintaining our earnings momentum and this quarter's results reflect a continuation of those efforts.
This quarter's earnings resulted in a GAAP return on average assets of 1.14% and a return on average tangible common equity of 11.5%. Our capital position remains very strong as we reported tangible common equity to tangible assets of 10.2% in the in a preliminary ce T one ratio of 12.8% in a primary, I'm sorry, preliminary total risk based capital ratio of 15.2%.
Our fourth quarter and full year 2024 results reflect the unique strengths of the company which continues to distinguish us among our peer group.
First, among those, we have intensely built our company with a local market authority model which allows us to bring a personalized community banking approach to our customers while still having the size and reo and resources to provide product and technology depth and breadth and top of the line services. While this model is not new in theory, it is unique to banks our size and larger. And as a result, we've experienced growth in our customer base and we've seen continued interest from high performing bankers in our region who seek to join our franchise.
Second, we operate in a highly desirable geography as the southeastern United States continues to experience growth. Our geography presents an advantaged opportunity for organic growth and a wealth of attractive places nearby for De Novo expansion, our capability to capitalize on both metro and community market opportunities throughout our footprint gives us a unique opportunity and allows us to entertain a lot of growth options as the banking landscape evolves.
And then lastly, we have an experience and ambitious leadership team. Our team has the right mix of experience and forward thinking vision that's required to take our company into its next phase of growth. Our team which is a relatively younger team compared to our peers continues to produce results for our customers and shareholders. This history of success by this relatively young team gives us confidence in the staying power of our franchise and the opportunity to generate, to generate meaningful long term value.
Ultimately, the com the combination of our business model, our geography, our leadership and our performance track record sets the stage for an ambitious future. So looking into 2025 and what can you expect from us? Well, you can actually expect us to do more of the same.
Our focus has been and it's going to continue to be on deploying capital to grow earnings per share and create long term shareholder value. That's not changing.
Our first priority has been and always will be organic growth. We remain focused on growing organically through both our retail and commercial businesses and in metro and community markets that we serve today. And we expanded on that this quarter with the addition of nine new revenue producing bankers that's for a total of 32 for the year.
We're also continuing to pursue new markets as we aim to take our banking model into markets that are contiguous with our footprint. Last quarter, we announced our expansion in Tuscaloosa, Alabama and we're pleased to announce this quarter that we are expanding into Asheville, North Carolina. This is our first step into North Carolina and we're pleased to move into this market at a unique time in its history. As many, there are rebuilding their lives and businesses.
The impact of hurricane Helene on the national community has been devastating and we are ready and eager to bring our expertise and capital resources to this market as it rebuilds.
While much of the media coverage has moved on to other stories in the news cycle, our team views asphalt as a permanent part of our story and we look forward to being part of the rebuilding efforts and helping provide the much needed capital investment for this community in both Asheville and Tuscaloosa. We've brought on strong leadership, begun hiring production teams with local roots in those communities and will soon be establishing a physical presence in both of those new markets. You can expect us to continue doubling down on our value proposition by additional investment in both existing and expansion markets.
Our second priority for capital employment is bank acquisitions. We remain interested in combination opportunities that align culturally geographically and financially we believe like many that that we're headed into a more accommodative M&A environment and we're prepared when the right opportunities present themselves.
We're routinely building relationships with banks that look like us and that they operate in community. They operate a community focused organization, serve both retail and commercial customers, have meaningful market share and fit well with our existing branch footprint.
Lastly, before I pass it over to Michael, I'd love to congratulate our team on another strong quarter and a successful year when we assess our performance against the ambitious goals that we set for ourselves for 2024 you all have been rock stars and I appreciate every one of you. I look forward to what we can accomplish together in 2025.
I'll now hand the call over to Michael to go further into our financial results.

Michael Mettee

Thank you, Chris, and good morning, everyone. I'll first take a minute to walk through this quarter's earnings and touch on our outlook for 2025.
We reported net interest income of $108.4 million for the quarter reported noninterest income was $22 million or $24.2 million an adjusted basis. After adjusting for approximately $2.2 million in nonreoccurring facilities related charges during the quarter, non interest expense was $73.2 million and provision expense came in at $7.1 million.
All in reported net income was $37.9 million or $39.8 million an adjusted basis on a full year basis. We reported net interest income of $416.5 million reported. Noninterest income was $39.1 million or $95.6 million an adjusted basis.
Full year Noninterest expense was $296.9 million or $294.9 million an adjusted basis. And provision expense came in at all $12 million in our full year reported, net income was $116 million or $159.3 million an investment basis.
Looking at margin for the quarter net interest margin was down a couple of basis points to 3.5% which was within our previously guided range impacted by a four basis point drag due to carrying excess interest bearing cash. During the quarter, we saw contractual interest rates on loans decreased 22 basis points and our yield on interest earning assets decreased 19 basis points to 6.01% due in large part to the decrease in overall benchmark interest rates on a dollar basis. Net interest income was $2.4 million a higher net asset base in the quarter. Largely due to growth in loans and interest earning cash balances.
An increase in securities income of $1 million also contributed to the overall increase due to the first full quarter of benefit from the recent securities repositioning from the third quarter, the securities yield was somewhat impacted by the change in benchmark rates but still resulted in the increased yield of 19 basis points.
On the liability side, we executed on target targeted deposit repricing in line with market interest rates. As we aim to prudently manage our cost of funds in the shifting interest rate. Environment, cost of interest bearing deposits decreased 21 basis points to 3.37% in the quarter, bringing down our cost of total deposits to 2.7%.
As Chris referenced previously, we continue to prioritize organic deposit balances as our means to growing our business with core deposit balances at 10.8% on an annualized basis in the quarter.
Broker deposits remain a small percentage of our deposit balance and that will continue. We anticipate that a portion of these higher cost deposits will run off over the next year. If market interest rates decline as reflected in the 9.7% decrease noted this quarter in 2025 we'll continue to focus on growing both sides of the balance sheet as Chris mentioned and we expect our net interest margin to land between 3.54% and 3.61% in the first quarter.
Moving to adjusted noninterest income. We reported core noninterest income of $24.2 million during the quarter which reflects a slight increase over the previous quarter amidst a seasonal slowdown in mortgage. The company maintains strong fee income levels through our investment services and swap fees in the fourth quarter.
Looking at expenses over the past few years, we've made investments in our team and technology as we prepare for our next phase of growth. As a company, as we move into 2025 we're prepared to capitalize on that investment.
Our expense strategy in 2025 is to align capital investment directly with revenue opportunities to drive increased profitability for the organization such as new banking teams, business units are taking opportunities to enhance the customer experience in the quarter. Core noninterest expense decreased to $72.7 million as compared to $76.2 million in the third quarter, resulting in a core efficiency ratio of 54.6% compared to 58.4% in the prior quarter.
The decline in noninterest expense was concentrated within the banking segment resulting in a banking segment, coefficiency ratio of 50.2% compared to 54.1% in the prior quarter.
The decrease was primarily attributable to adjustments in our short term incentive expense as we right size our accrual to close the year in a one time franchise tax benefit recognized in the fourth quarter in 2025 we're expecting to grow banking expenses at about 45% as we continue to grow the business and execute on our near and long term vision specific to the first quarter of 2025. We anticipate banking non interest expense to land in the range of $64 million to $66 million credit.
Our charge, our charge off levels were elevated. This quarter driven by the full charge off of a single previously reserved C&I relationship totaling $10.5 million.
We discussed this relationship in our second quarter call when we established a specific reserve.
It's a credit in the services industry that underwent a series of challenges specific to licensing and employee fraud, which ultimately led to bankruptcy.
These circumstances were specific to the borrower and not an indication of anything deeper systemic within the loan book as we communicated in the second quarter call. And as expected, we did reach a resolution this credit by year end.
The charge off drove a decrease in our overall ACL and nonperforming loans to total loans ratio during the quarter absent the impact of this relationship. Our fourth quarter annualized net charge off rate was approximately three basis points which is more in line with our normal run rate.
Our total AC L balance that you're in with $152 million or 1.58% of loans held for investment, partially offsetting the decrease mentioned was a reserve build of $7 million primarily due to new allowance on loan growth and updates in our reserve modeling on capital. We continue to maintain very strong capital ratios including an equity to total assets ratio of 11.9% and a prelim preliminary ct one ratio of 12.8%.
As Chris mentioned, our team remains focused on the deployment of that capital to deliver consistent long term growth and earnings and tangible book value.
With that, I'll now turn the call back over to Chris to conclude.

Christopher Holmes

Thanks, Michael, for the call. Please with our quarterly and full year results. And we're proud of the progress that we've made as a company over the past year. We believe we're poised for a strong year in 2025 and look forward to sharing that progress progress with all of you. Thank you again for your interest in FB financial and operator. At this time, we'd like to open the line for questions.

Question and Answer Session

Operator

Ladies and gentlemen, at this time, we will begin the question-and-answer session. (Operator Instructions)
Stephen Scouten, Piper Sandler.

Stephen Scouten

Hey. Good morning, guys. I guess if we could talk a little bit about the new hires. Just a little more detail there. And then you said there were nine this quarter and that's 32 on the year. And I think you called out five mortgage producers maybe elsewhere in the presentation. So can you maybe just give us a feel for, maybe the disciplines of those hires that you're bringing on in terms of where they're focused and kind of what you would think would be a viable target for next year if you continue to, to bring in new people.

Christopher Holmes

Yeah, in general, what we're talking about is I would call them, core c and I, frontline bankers. I mean, it's, it's a, we see as, we're not complicated as an organization. And so, there's not a lot of, it's a pretty direct number in terms of, what we call a relationship manager or a producer. And there, it's a sort of a, an elite titling group in our organization. So I, I'd say it's, it's pretty much core c, and I frontline bankers. They're, what else is in there besides that, Travis or? No.

Travis Edmondson

I think, I think that that's the majority of it. And also it's, it's pretty diverse geographically as well. It's not where we had in this quarter, a lift out of nine in one location. It's, it's pretty diverse of geographies.

Michael Mettee

Yeah, that's right. And, and as we think, as we think about 2025 we don't, we don't set a target that we're going to go out and hire, 42 revenue producers. It's more about opportunities finding the right fit. You know, these, these things take years to recruit the right people, to fit what we do. And so they kind of come to you as they come to you and that's what happened in the mortgage area. And then, and, some of the people we've added in the East, we've been been recruiting for a while and then we added a couple in Nashville as well as we, as we build out that team.

Christopher Holmes

And I would say this about as we look forward to 25 and beyond, you know, recruiting is a never ending process. You have to do it every day. And so, the reason, we didn't use to mention that very much, but we mentioned now it's because we are getting a lot of inbound opportunities and we expect that to continue and perhaps, maybe even gain more momentum as there's disruption in the market. And so I would tell you that we're pretty optimistic based on just conversations that we're having around our geography.

Stephen Scouten

Yes, that makes a lot of sense. And is that optimism around hiring, what seems to give you more optimism around growth coming up into this year? Are there other signs that you're seeing that leads to, to kind of this optimism. And as you guys talked about in the release building deposits now for what you expect to be a ramp up in growth here next year.

Christopher Holmes

Yes. So as we look forward and, and, fourth quarter, which is not traditionally, the most, most robust border and we had a net loan growth of 5.2%. If, as we've talked about through this year, there's a little bit of what we anticipate next year from that hiring of folks. And then there's just the normal, I'd say what I call normal organic growth of our geography, which is, which is an advantaged geography which I talked about in the, in the prepared prepared remarks. So it's, it's that and it's less, it takes a little bit of time for those folks as they come on to, to really begin to bring volume. And especially if they have some type of, something that restricts their, their calling. We abide very strictly by those when we have those, when those are in place. And so, but we do have some folks that have been here for now close to a year and we really expect them to those folks to really begin to be the ones that hit the stride.
And so that's a portion of the growth, but it's not, it's not totally dependent on that we expect our existing roster of relationship managers to be out acquiring accounts as well.

Stephen Scouten

Got it. Okay. Yeah, that makes sense. And then maybe just lastly for me. Oh, sorry. Yeah.

Christopher Holmes

I would say one other thing there because you mentioned the deposit side, we have bulk up on deposits and I say bulked up, that's probably the wrong term. We continue to grow at a at a measured pace on the deposit side. You know, if you'll notice our loan to deposit ratio has, has shrunk some and so as we look into next quarter, you know, in anticipating loan growth, but we also have some potentially maturing deposits at some higher costs that could that we may or may not retain depending on the relationship there. I would say there not core relationship deposits but but, but their, their relationship but maybe not core relationship deposits. And so we're, we're, we're also managing through that say in the first quarter or so.

Stephen Scouten

Makes sense. Nice to have that flexibility. Just the last thing for me maybe is your, your comments around M&A Chris, I know kind of in the past you've talked about maybe needing to have some patience around deals because you don't know if you could get more than one deal approved a year or what that timeline might look like. But, we just saw one deal get approved in less than three months of some, some decent size. So, does what you're seeing and hearing. Does it lend you to be slightly more aggressive and think about, okay, if it's a, might be a B plus deal, not an A plus deal, but I might still go after it in this kind of environment. Does it, does it change your mindset there at all?

Christopher Holmes

Yeah, it does, it does shape our view and changes it somewhat from where it was in much the way you alluded to.
You know, I think, I think under the previous regulatory leadership, that, that was in place, I mean, you were looking at one deal in eight, in an 18 month period. And so I think you had to be quite judicious about what you got into, because the opportunity cost could be great.
And, I think as long as you don't get yourself over your skis and I think that's an important point. As long as you don't get yourself over your skis and acquisitions, you can certainly do that then I think as long as you manage it, well, I think your regulatory agencies are going to work with the parties that, that, that want to do a transaction in a more constructive way. And so, that, that, that all remains to be seen, but as you said, we just saw a deal get approved fairly quickly, I think that was Federal Reserve transaction. I think it was regulated there, but we saw it get approved relatively quickly. And, and hopefully that's a, that's a sign of things to come because that timing as you know, and, and as folks that have done those transactions before that length of time, that that approval time is risk is just additional risk on the transaction. And so the shorter time, it improves the risk.

Stephen Scouten

Yeah, it makes a lot of sense. Thanks for the time and congrats on the great 2024.

Christopher Holmes

All right. Thanks, Stephen.

Operator

Brett Rabatin, Hovde Group.

Brett Rabatin

Hey guys. Good morning. Brett Rabatin. Wanted to start on credit and I'm sure you guys saw locally that, we lock sold the B AC Tower, Phillips Plaza and Parkway Towers at pretty significant discount and obviously the common theme there seems to be age of age of building. And so I know office is only about 4% of the portfolio. But just wanted to see if you guys had any thoughts on an office in Nashville, any age properties and if you guys had any kind of median or average age for the portfolio for, for you guys and just how you see the commercial real estate market here.

Christopher Holmes

Yeah, Brett, good question and we did see that. And we couldn't miss it. So we did see that we did, we did have two transactions that took place to office transactions where they took place at a loss where they sold the buildings at a loss. Both of them were bought some time ago. I think even Precovid, maybe they were bought PRECOVID, one of them is substantial loss. But I think, I think that's, I think you have to look at a couple of couple of things there. Brett first, I think fundamentally, I think the first question is, man, what does that mean that we need to be questioning where Nashville is economically or middle Tennessee, let's say because that's the market we zeroed in on with these transactions. And so, is there something going on there?
Fundamentally, I would say the answer to that is no, and I'll tell you, one a lot of the things that have caused Nashville to have this growth momentum that those things are still in place in migration still occurs. The corporate relocation pipelines are still solid, the inquiries are still solid with the, with the chamber and E CD. And so those things are, are, are still quite positive and that's what's driven a lot of, a lot of the growth on those two particular properties, two of those property, I think the two that you talked about. So the loss and I don't know if you mentioned this one, but there was a third that sold in suburban Nashville also at auction. Every one of those were older properties. Two of those, the first two you mentioned were center city properties or, or downtown properties that were older buildings that had some occupancy issue. And so, and if you notice they were out of town, they were acquired by fund a fund from out of town that you, may, may not have had the best knowledge coming in.
And so I see those as being not unusual. By the way, they weren't financed locally either. And then on the suburban one, that one, so it's, it's sold at auction, but at a, at a very small loss to the, to the, to the entity that financed it, matter of fact, well, under a million dollars in terms of, of their, their. So the lender got, got out on that one. And by the way, on the flip side, the same week that those two sold at auction, there was another property that sold at a record $2870 per square foot, a 26,000 square foot building on Broadway that sold for $75 million. And so, it, like all, like any market, I think you have to, you have to go in with your white, especially when you're in the real estate business, you need your eyes wide open. And, and ours is no different.

Brett Rabatin

Okay. But to the question and, and I saw that on Broadway, that was a very interesting price. But the question I had was the, those to me seem to be outliers, but they also seem to indicate that, maybe properties that were 3,540 years old, you know, might, might have an issue. So the question was, it sounds like you're saying you don't really see anything commercial real estate wise. But just was curious if you guys hadn't guys had an average or median age for your office portfolio for the buildings.

Christopher Holmes

Yeah, we don't have that right here at our, at our fingertips. And remember our our office portfolio, we don't do in any of our markets. We don't do much center city type office financing and so we don't have a lot of comparable to what was what, what, what's sold here at a discount? So.

Brett Rabatin

Okay. The other question I wanted to ask was around the margin. Maybe Michael and just talking about the improvement in the first quarter and it my, my sus suspicion is is that a large part of it could be driven by a reduction in liquidity ie using, using some cash to fund loans. Just wanted to hear maybe Michael if that's the case, any other thoughts on what would drive the margin the first quarter. You know, and then just as you guys see it for the full year, I mean, the fed is not changing interest rates just to keep it static. If you guys can, you kind of outrun the local deposit market that's still pretty robust.

Michael Mettee

Yeah, Brad you nailed it. It's it's loan to deposit ratio. Chris. Chris mentioned that earlier, we're down 85%. So we either deploy some of the excess liquidity or as Chris mentioned, we have higher cost deposits that we don't renew or they run off at their noncore relationship. Yeah, that that could be a boon to margin. And also we like stability in the interest rate environment, right? So we tend to perform better as an institution and, kind of more methodical moves in rates and the team's done a good job as rates have gone down on the deposit side.
Keep in mind, half of our loan portfolio is floating. So it happens within 90 days, you get a little bit of a peak down and in interest rates on the on the loan side. And so if things things stabilize, yield curve steepens, we think we'll see some margin expansion.
Okay?

Brett Rabatin

I appreciate the call. Congrats guys on a solid 2024.

Christopher Holmes

Thank you for that.

Operator

Russell Gunther, Stephens.

Russell Gunther

Hey. Good morning, guys.

Christopher Holmes

Good morning, welcome.

Russell Gunther

I just want to follow up on the loan growth discussion earlier. You guys have a lot of good proof points around an optimistic 2025. I think in the past, you've talked about being able to accelerate the growth rate into the double digits. I'm just wondering if that's still the case or if the backup in rates puts a little caution that. How are you, how are you seeing that transpire over the course of the year?

Christopher Holmes

Yeah. So look as we look into 2025 we see, you know, some continued good things and some continued momentum and, and you know, we're looking at that low double digit, high, single digit, high, single digit, low double digit type of loan growth rate is what we're is what we're targeting, so far that feels good. And and it's never easy, but so far it feels, it feels pretty good and, and that's what we're going to continue to target.

Russell Gunther

Understood. Okay, great. And then switching gears a bit, you guys are in a very comfortable excess capital, excess reserve position. You touched on the pickup in organic growth as well as the potential to put that to use via M&A in 2025. You've also been opportunistic in 24 around security repositionings and the buyback. So how are you thinking about those levers or is it kind of capital build mode for M&A Yeah, I, we didn't necessarily mention that on restructuring and buybacks, but they're all, they're always on the table. We like, you know that the first two options that Chris talked about better capital appointments, which is no change from what you've heard us say. But, but we really think those will materialize here in 2025. So we'll be opportunistic on security restructuring. And, and or on share buybacks if they don't materialize as quickly. But at this point, we're certainly focused on organic opportunities and then M&A second, secondly, got it. Okay, great. Last one for me, I appreciate the commentary on the core expense growth rate within the commercial bank. How are you thinking about expenses within the mortgage vertical and any improved efficiencies there?

Christopher Holmes

Yeah. First of all, but you know, we got four straight quarters of positive mortgage contribution. So 2024 wasn't exactly a an easy year in the mortgage business, so proud of the kind of the turnaround they had there. And we expect them to continue to improve, we want to be better than the market with regard to mortgage. We expect to be better operators. And so we, we'd expect them to continue to improve in 2025 and that efficiency ratio. I don't you know, I don't think the overarching housing market and interest rate markets can allow for just, blowout years in mortgage. But that's okay. We've taken a lot of the peaks and valleys out of mortgage and, and expect to operate more efficiently in 2025 than we did in 24. And we operated more efficiently in 24 than we did in 23.

Russell Gunther

All right. Very good, guys. That's it for me. Thanks for taking my question.

Christopher Holmes

Thanks, Russ.

Operator

Catherine Mealor, KBW.

Catherine Mealor

Thanks. Good morning. Just want to follow up on the margin. I want to see if you could talk a little bit about deposit cost. And I think one thing that we're trying to figure out and in the indus as an industry is just what deposit, I think deposit betas have been a lot better for everybody so far. But as we start to see better growth in 25 you know, what, what happens to deposit cost as growth becomes stronger. And so just kind of curious maybe as you put on new deposits, where are those average costs are? And how you're kind of thinking about deposit costs over over the course of 25? Thanks.

Michael Mettee

Yeah, good morning, Catherine. As you kind of alluded to it still competitive, right? You know, especially in some of these higher growth markets. It's expensive to move deposits. We actually also saw a little bit of a shift into some interest bearing from noninterest bearing at late in the quarter, where people were taking advantage of, of rights. So, even though you would have thought that would have happened earlier.
Excuse me? So still pretty aggressive. We're still, we're seeing, C DS kind of in some of our markets still above 4.5%. And, and we're not putting on C DS at that rate, but we're seeing that competitively in the kind of middle Tennessee area. It's, it's not quite as bad here as we're seeing in some of more of our community markets. But, you're going to have to be in that 80 90% of fed funds to get new deposits. And so that's where we expect it to come on that. We know, we know that they're not going to come on much cheaper than that. So it will be a competitive year when, you're trying to grow relationships and deposits and we got to work both sides of the balance sheet.

Catherine Mealor

Great. But then on the flip side with loan pricing, you would, you say that you still are seeing, expansion in your net new margin just given what you're seeing on pricing and expectations for growth to be better.

Michael Mettee

Yeah, yeah, it's expansion. I'd say it's holding pretty steady. We're seeing kind of seven twentyish on new loan origination. And so if you think about that, it's, it's in that kind of 350 to 400 basis point margin, spread, not margin, spread range. So loan loans also competitive, you know, it as things have slowed a tad bit and, for mod, I guess, modestly slowed and makes loan growth and loan pricing a little bit more aggressive as well. So, that's why that's why I mentioned we're, we have to work both sides of each relationship, make sure we get the deposits and the loans. But so far our loan yields have kind of held in there. The sting of the yield curve can, can create some challenges as to how competitors price that they're priced off the short end or the middle of the curve. And so we got to maintain our discipline with regard to that as well.

Catherine Mealor

Great. And then maybe, and then maybe one more on the margin just kind of holistically, if we are in a kind of higher, let's look at the fed doesn't move rate. So we're kind of in a higher for longer rate environment. Do you believe that you can still see continued expansion, expansion throughout the next couple of years?

Michael Mettee

Yeah, I think we should see, expansion of a basis point or two a quarter, right? If you just naturally repricing, the balance sheet and so it's not going to be Gangbusters, but we'll, we'll move modestly higher over time.

Catherine Mealor

Okay, great. And then maybe just one other question, just away from the margin on just growth. We, as you think about hitting high, single digit to low double digit growth in 25 are you seeing more opportunities in C&I versus commercial real estate? Or if you could just kind of help us talk about where you're seeing more pipeline opportunities today, like the 10 year is making us nervous that CRE growth may not be as robust this year, but just kind of curious what you're seeing from your customers.

Travis Edmondson

Yeah, good morning. This is Travis. We're seeing growth opportunities in both. H1stly, we have, we have concentrated more on the C&I space over the last 12 months and going forward.
We have some room in the CRE bucket, but we're not going to go over any regulatory thresholds. So we don't really have a headwind there, but we're not going to grow Gamebusters there. We will see some marginal growth in the CRE portfolio, but we're getting a lot of good opportunities. We're really taking care of our existing relationships in those areas, but the net new relationships are primarily coming from the seasons.

Catherine Mealor

Great. Thanks so much.

Christopher Holmes

And Travis, I think it'd be fair to say we see a lot actually of CRE relationships that we just don't, we just don't pursue. So I say not, I'm sorry, we see a lot of CRE opportunities. I mean, that we just don't pursue because we are trying to maintain you know, a certain distribution of the portfolio and not get overly concentrated in any one area. But there's still a lot of CRE out there to be financed that that we're, we're frankly not able to take advantage of some of that. And so we're, we're just because we're trying to make sure we strike the right balance.

Catherine Mealor

Makes sense. All right, great. Thank you. Great quarter and great year.

Operator

(Operator Instructions)
Steve Moss, Raymond James.

Steve Moss

Good morning, guys. Most of my questions have been asked and answered here, but just want to follow up just clarification credit here with the loan that was charged off. You guys mentioned, the specific reserve was that specifically reserved for ahead of this quarter or was that the driver of the provision.

Christopher Holmes

This quarter?

Travis Edmondson

The specific reserve for the chargeoff prior quarters.

Christopher Holmes

Second quarter, most of that was established in the second quarter.

Steve Moss

Okay. So then the purge this quarter is a mix of growth and other credit specific reserves maybe.

Michael Mettee

No, it's a, it was loan growth. Yes. And then, marginally worse economic forecast that we generally moody's baseline and got modestly worse, which was, the reason for that there wasn't any other specific credits that drive it out and.

Christopher Holmes

There was a little bit of clean up on that, on that charge off as well. It was not, not material, a material amount, but there was a little bit of clean up on that charge off where it was slightly over that specific reserve. But that was a lesser piece of that provision.

Steve Moss

Okay, great. And then just one more thing, on in terms of margin sensitivity here, we'll see where the fed goes for the upcoming year, but just kind of curious, where your balance sheet is positioned today for, additional fed rate cuts, whether we get 12 or, more than that, just how you think about the margin.

Michael Mettee

Yeah, we're slightly asset sensitive. She said, again, sticking in this range or no, no rups is fine fine with me. We have a steeping yield curve which should, should benefit at least the balance sheet makes it a little bit tougher on the mortgage side, but well, well positioned slightly asset sensitive, you know, today and it changes especially here recently every 24 48 hours. You know, we think there probably will be a couple right cuts this year. But we got them kind of back half of the year as we see how things develop, wouldn't be surprised if there's zero. So, yeah, we got, we got to be able to operate no matter what the fed does and we expect to do so.

Christopher Holmes

We would feel pretty good if it stayed where it was. But if we got surprised and rates really went down in a way, Keep in mind we got, we have a lever with the mortgage capability that would probably get ramped up significantly. And so, we so that's part of the position.

Steve Moss

Great. Well, I really appreciate all the call here today in the next quarter, guys.

Operator

Thank you, Steve. Ladies and gentlemen, at this time, we're at the end of today's question-and-answer session. I'd like to turn the floor back over to Chris for any closing comments.

Christopher Holmes

All right. Thanks, Jamie. And I would just like to say thanks once again to everybody for joining us on the call. We always appreciate your interest. We appreciate your participation and and we will look forward to joining again next quarter. Thank you.

Operator

Ladies and gentlemen, with that, we'll be ending today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.