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FB Financial Corporation
1/21/2025
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 Mati, 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.firstbankonline.com 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 followed 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, the company's website at www.firstbankonline.com, and on the SEC's website at www.sec.gov. I would now like to turn the floor over to Chris Holmes, FB Financial's president and CEO.
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 81 cents and an adjusted EPS of 85 cents per share. We've grown our tangible book value per share, excluding the impact of AOCI, at a compound annual growth rate of 12.9 percent since our IPO in 2016. On a four-year basis, we reported EPS of $2.48 or adjusted EPS of $3.40, which represents a year-over-year increase of 13 percent. Four-year pre-tax, pre-provision net revenue was $158.7 million or $217.1 million on 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, approximately 4.4%, funded through the growth of our core deposit balances of $343.5 million, or about 3.3%. The things I've emphasized over the past several quarters has circled around the strength of our operating foundation, including our solid capital liquidity positions while maintaining our earnings momentum. And this quarter's results reflect the continuation of those efforts. This quarter's earnings resulted in a gap return on average assets of 1.14% and a return on average tangible common equity of 11 and a half percent. Our capital position, remains very strong as we reported tangible common equity to tangible assets of 10.2% and a preliminary CET1 ratio of 12.8% and 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 continue to distinguish us among our peer groups. First among those, we have intentionally 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 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 advantageous 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 experienced 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 meaningful long-term value. Ultimately, 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 next, from us, well, you can actually expect us to do more of the same. Our focus has been and is 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've remained 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 into 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 Asheville 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 Asheville 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 we'll 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 deployment is bank acquisitions. We remain interested in combination opportunities that align culturally, geographically, and financially. We believe, like many, 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 in that 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.
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 non-interest income was $22 million or $24.2 million on an adjusted basis after adjusting for approximately $2.2 million in non-recurring 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 on an adjusted basis. On a full year basis, we reported net interest income of 416.5 million, reported non-interest income was 39.1 million or 95.6 million on an adjusted basis. Full year non-interest expense was 296.9 million or 294.9 million on an adjusted basis, and provision expense came in at 12 million. All in, our full-year reported net income was $116 million or $159.3 million on an adjusted 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 decrease 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 on 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 targeted deposit repricing in line with market interest rates as we aimed 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 up 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 as market interest rates decline. as reflected in the 9.7 percent 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 percent and 3.61 percent in the first quarter. Moving to adjusted non-interest income, we reported core non-interest 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, or taking opportunities to enhance the customer experience. In the quarter, core non-interest 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 percent compared to 58.4 percent in the prior quarter. The decline in non-interest expense was concentrated within the banking segment resulting in a banking segment core efficiency ratio of 50.2 percent compared to 54.1 in the prior quarter. The decrease is 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 4 to 5 percent 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 to $66 million. On credit, 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 this 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 or systemic within the loan book. As we communicated in the second quarter call and as expected, we did reach a resolution on 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. As with 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 ACL balance at year-end was $152 million, or 1.58% of loans held for investment. Partially offsetting the decrease mentioned was a reserve bill 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 preliminary CT1 ratio of 12.8%. As Chris mentioned, our team remains focused on the deployment of that capital to deliver consistent long-term growth in earnings and tangible book value. With that, I'll now turn the call back over to Chris.
All right. Thanks, Michael, for the call. To conclude, we'll please... With our 40 and full year results, 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 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.
Ladies and gentlemen, at this time, we will begin that question and answer session. To ask a question, you may press star and then 1 using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. To withdraw your question, you may press star and 2. At this time, we will pause momentarily to assemble the roster. And our first question today comes from Steven Scouten from Piper Sandler. Please go ahead with your question.
Hey, good morning, guys. I guess if we could talk a little bit about the new hires, just a little more detail there. I know 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 bring in new people?
Yeah, in general, what we're talking about is I would call them core C&I frontline bankers. I mean, it's – we – As you know, 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 it's sort of an elite titling group in our organization. So I would say it's pretty much core CNI frontline bankers. They're What else is in there besides that? Is it Travis or Mike?
No, I think that that's the majority of it. And also, 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 just pretty diverse in geographies.
Yeah, that's right. And as we think about 2025, 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, um, to fit what we do. And so it kind of come to you as they come to you. And that's what happened in, in the mortgage area. And then, and you know, some of the people we've added in the East, uh, we've been, been recruiting for a while. Uh, and then we added a couple of Nashville as well as we, as we build up that team.
And I would say this about, uh, 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, you notice we didn't used to mention that very much, but we mentioned it now, but it's because we are getting a lot of inbound opportunities, and we expect that to continue and perhaps maybe even gain more momentum is 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.
Yeah, 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 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?
Yeah, so as we look forward and, you know, fourth quarter, which is not traditionally, you know, the most robust quarter, and we had a net loan growth of 5.2 percent. 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'll call normal organic growth of our geography, which is an advantage geography, which I talked about in the prepared remarks. So it's that, and it's less, you know, it takes a little bit of time for those folks as they come on to really begin to bring volume, and especially if they have some type of something that restricts their calling. We abide very strictly by those when those are in place. But we do have some folks that have been here for now close to a year, and we really expect 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 totally dependent on that. We expect our existing roster of relationship managers to be out acquiring accounts as well. Got it. Okay.
Yeah, that makes sense. And then maybe just lastly for me, oh, sorry, yep.
I would say one other thing there, because you mentioned the deposit side. You know, we have bulked up on deposits, and I say bulked up. That's probably the wrong term. We continue to grow at a measured pace on the deposit side. You know, if you'll notice, our loan-to-deposit ratio 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 cost that we may or may not retain depending on the relationship. I would say they're not core relationship deposits, but their relationship, but maybe not core relationship deposits, and so we're also managing through that, say, in the first quarter or so.
Makes sense. Nice to have that flexibility. Just the last thing for me, maybe, is 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 You know, we just saw one deal get approved in less than three months of some decent size. So does what you're seeing and hearing, does it lend you to be slightly more aggressive and think about, okay, it 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 change your mindset there at all? Yeah.
Yeah, it does shape our view and changes it somewhat from where it was in much the way you alluded to. You know, I think under the previous regulatory leadership that was in place, I mean, you were looking at one deal, you know, 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. And I think as long as you manage it well, I think your regulatory agencies are going to work with the parties that want to do a transaction in a more constructive way. 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 hopefully that's a sign of things to come because that timing, as you know and as folks that have done those transactions before, That length of time, that approval time is risk, is just additional risk on the transaction. And so the shorter time, it improves the risk picture.
Yeah, it makes a lot of sense. Thanks for the time, and congrats on a great 24th.
All right. Thanks, David.
And our next question comes from Brett Radican from Hopti Group. Please go ahead with your question.
Hey, guys. Good morning. Good morning, Brett.
Good morning.
Wanted to start on credit, and I'm sure you guys saw locally that Wheelock sold the LBAC Tower, Phillips Plaza, and Parkway Towers at pretty significant discounts, and obviously the common theme there seems to be 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, you know, 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.
Uh, yeah, Brett, uh, big question. And we, we, we did see that, uh, and, uh, We couldn't miss it. So we did see that. We did have two transactions that took place, 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 pre-COVID maybe. They were bought pre-COVID. One of them was a substantial loss. But I think that's I think you have to look at a couple things there, Brett. First, I think fundamentally, I think the first question is, man, 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, you know, one, A lot of the things that have caused Nashville to have this growth momentum, those things are still in place. In-migration still occurs. The corporate relocation pipelines are still solid. The inquiries are still solid with the chamber and the ECD. And so those things are still quite positive. And that's what's driven a lot of the growth. On those two particular properties, two of those properties, I think the two that you talked about that sold at a 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 downtown properties that were older buildings that had some occupancy problems. And so, and if you notice, they were out of town. They were acquired by a fund from out of town that, you know, 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 sold at auction but at a very small loss to the entity that financed it. As a matter of fact, well under a million dollars in terms of their – so the lender 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 $2,870 per square foot. a 26,000-square-foot building on Broadway that sold for $75 million. And so, you know, like any market, I think you have to go in with your – especially when you're in the real estate business, you need your eyes wide open, and ours is no different.
Okay. But to the question – and I saw that on Broadway. That was an interesting price – But the question I had was, those to me seem to be outliers, but they also seem to indicate that maybe properties that were 35, 40 years old 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 had an average or median age for your office portfolio for the buildings.
Yeah, we don't have that right here at our fingertips. And remember, 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 sold here at a discount. Okay.
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 my suspicion is that a large part of it could be driven by a reduction in liquidity, i.e., 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 in the first quarter? You know, and then just as you guys see it, for the full year, assuming the Fed's not changing interest rates, just to keep it static, if you guys can kind of outrun the local deposit market that's still pretty robust.
Yeah, Brad, you nailed it. It's loan-to-deposit ratio. Chris mentioned that earlier. We're down 85%. So as we either deploy some of the excess liquidity or, as Chris mentioned, If we have higher-cost deposits that we don't renew or they run off at their non-core relationship, yeah, 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, you know, 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, you know, half of our loan portfolio is floating, so it happens within 90 days. You get a little bit of a peak down in interest rates on the loan side. And so as things stabilize, you know, yield curve steepens, you know, we think we'll see some margin expansion.
Okay. Fern, I appreciate the call, or congrats, guys, on a solid 2024. Thanks, Rob. Thank you for that.
Our next question comes from Russell Gunther from Stevens. Please go ahead with your question.
Hey, good morning, guys. Good morning, Russell. 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 on that. How are you? how are you seeing that transpire over the course of the year?
Yeah. So, uh, uh, as we look into 2025, we see, uh, 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, uh, high single digit, low double digit type of, uh, loan growth rate is what we're, uh, is what we're targeting. Um, You know, so far that feels good, and it's never easy, but so far it feels pretty good, and that's what we're going to continue to target. Understood. Okay, great.
And then switching gears a bit, you know, 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 securities repositioning and the buyback. So how are you thinking about those levers, or is it kind of capital build mode for M&A?
Yeah, you notice we didn't necessarily mention that on restructuring and buybacks, but they're always on the table. We like, you know, the first two options that Chris mentioned, talked about as better capital deployments, which is no change from what you've heard us say. But we really think those will materialize here in 2025. So we'll be opportunistic on securities restructuring 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 secondly.
Got it. Okay, great. Last one for me. 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?
Yeah, first of all, you know, we've got four straight quarters of positive mortgage contributions. 2024 wasn't exactly an easy year in the mortgage business. So proud 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 would expect them to continue to improve in 2025 in that efficiency ratio. I don't think the overarching housing market and interest rate market is going to 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 expect to operate more efficiently in 2025 than we did in 24, and we operated more efficiently in 24 than we did in 23.
All right. Very good. Guys, that's it for me. Thanks for taking my question. Thanks, bro.
And our next question comes from Catherine Mueller from KBW. Please go ahead with your question.
Thanks. Good morning. I just want to follow up on the margin. I want to see if you could talk a little bit about deposit costs. And I think one thing that we're trying to figure out 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, what happens to deposit costs as growth becomes higher? And so just kind of curious maybe as you put on new deposits, where those average costs are and how you're kind of thinking about deposit costs over the course of 25. Thanks.
Good morning, Catherine. As you kind of alluded to, it's 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 non-interest-bearing late in the quarter where people were taking advantage of rates. So even though you would have thought that would have happened earlier. Excuse me. So still pretty aggressive. We're seeing CDs kind of in some of our markets still above 4.5%. And we're not putting on CDs at that rate, but we're seeing that competitively. In the kind of middle Tennessee area, it's not quite as bad here as we're seeing in some more of our community markets. But you're going to have to be in that 80, 90 percent of Fed funds to get new deposits. And so that's where we expect it to come on. We know that they're not going to come on much cheaper than that. It will be a competitive year when, you know, you're trying to grow relationships and deposits, and we've got to work both sides of the balance sheet.
Great. But then on the flip side, with loan pricing, would you say that you still are seeing, you know, an expansion in your net new margin, just given where you're seeing loan pricing and expectations for growth to be better?
Yeah, it's – Expansion, I'd say it's holding pretty steady. We're seeing kind of 720-ish on new loan origination. And so if you think about that, it's in that kind of 350 to 400 basis point margin spread, not margin spread range. So loans also competitive. You know, as things have slowed a tad bit, and, you know, for, I guess, modestly slowed and makes loan growth and loan pricing a little bit more aggressive as well. So that's why I mentioned we have to work both sides of each relationship, make sure we get the deposits and the loans. But so far, loan yields have kind of held in there. The steepening of the yield curve 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've got to maintain our discipline with regard to that as well.
That's great. 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 throughout the next couple of years?
Yeah, I think we should see you know, expansion of a basis point or two, a quarter, right, if you're just naturally repricing the balance sheet. And so it's not going to be gangbusters, but we'll move modestly higher over time.
Okay, great. And then maybe just one other question just away from the margin on just growth. As you think about hitting high single-digit to low double-digit growth, in 25. Are you seeing more opportunities in CNI versus commercial real estate? Or if you could just kind of help us talk about where you're seeing more pipeline opportunities today. I think 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.
Yeah, good morning. This is Travis. We're seeing growth opportunities in both, honestly. We have concentrated more on the CNI 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 gangbusters We will see some marginal growth in the CRE portfolio. 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 CRE.
Great.
Thanks so much.
Go ahead. This is Chris. And, Travis, I think it would be fair to say we see a lot, actually, of CRE relationships that we just don't pursue. I'm sorry. We see a lot of CRE opportunities. I don't mean relationships 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 we're frankly not able to take advantage of some of that. And so we're just trying to make sure we strike the right balance.
Makes sense. All right, great. Thank you. Great quarter and great year.
Thanks, Catherine. Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Steve Moss from Raymond James. Please go ahead with your question.
Good morning, guys. Good morning. Most of my questions have been asked and answered here, but just want to follow up, just clarification on 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 this quarter?
The specific reserve for the charge off was Prior quarters.
Yeah, second quarter. Most of that was established in the second quarter.
Okay, so then the period of this quarter was a mix of growth and other credit-specific reserves, maybe?
No, it was loan growth, yes, and then marginally worse economic forecast. Yeah, we generally mootied baseline and got modestly worse, which was –
the reason for that there wasn't any other specific credits that drive it higher and there was a little bit of cleanup on that on that charge off as well uh it was not not material material amount but there was a little bit of cleanup on that charge off whereas it was slightly over that specific reserve but if that was a a lesser piece of that uh uh provision okay great and and then just
One more thing, you know, in terms of margin sensitivity here, you know, we'll see where the Fed goes for the upcoming year, but just kind of curious, you know, where your balance sheet is positioned today for, you know, additional Fed rate cuts, whether we get one, two, or, you know, more than that, just how you think about the margin.
Yeah, we're slightly asset sensitive. Again, you know, sticking in this range or, you know, No rate cuts is fine with me. We have a steepening yield curve, which should benefit at least the balance sheet. Makes it a little bit tougher on the mortgage side, but well-positioned, slightly asset-sensitive. Today, and it changes, especially here recently, every 24, 48 hours, we think there probably will be a couple rate 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 they're zero. We've got to be able to operate no matter what the Fed does, and we expect to do so.
We would feel pretty good if it stayed where it was, but if we got surprised and rates really went down in a pure way, we have a lever with the mortgage capability that would probably get ramped up significantly.
So that's part of the position. Great. Well, I really appreciate all the call here today, and nice quarter, guys. Thank you, Steve.
And, 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.
All right, thanks, Jimmy. 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 we will look forward to joining again next quarter. Thank you.
And, 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.