Q4 2024 United Community Banks Inc Earnings Call
Rich Bradshaw and Chief risk Officer, Rob Edwards.
United's presentation today includes references to operating earnings pretax pre credit earnings and other non-GAAP financial information for these non-GAAP financial measures United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release as well as at the end of the Investor presentation.
The Greatest in the World of the World
Speaker Change: Good morning and welcome to United Community Bank's fourth quarter 2024 earnings call. Hosting our call today are Chairman and Chief Executive Officer Lynn Harton.
Both are included on the website at UCB I Dot com.
Copies of the fourth quarter's earnings release and Investor presentation were filed this morning on form 8-K, with the SEC and a replay of this call will be available in the Investor Relations section of the company's website at U C. B I Dot com. Please be aware that during this call forward looking statements may be made by representatives of United.
Any forward looking statements should be considered in light of risks and uncertainties described on pages five and six of the company's 2023 Form 10-K as well as other information provided by the company in its filings with the SEC and included on its website.
Speaker Change: At this time I will turn the call over to Lynn Harton.
Lynn Harton: Good morning, and thank you for joining our call today.
Lynn Harton: We were pleased to report earnings of 61 cents this quarter and $2.04 for the full year.
Lynn Harton: On an operating basis, we recorded earnings of 63 cents for the quarter and $2 30 for the year.
Lynn Harton: This represented an annualized growth in operating earnings of 11% from last quarter.
Lynn Harton: And an increase of 9% for the full year of 24 compared to 23.
Lynn Harton: Our tangible book value increased 9% year over year and is a 7% annualized rate during the fourth quarter.
Lynn Harton: Our operating return on assets reached 1.18% in the quarter and.
Lynn Harton: We finished the full year at one point or 2%.
Lynn Harton: Our operating return on tangible common equity increased to 12, 1% for the quarter.
Lynn Harton: At 11, 4% for the full year.
Lynn Harton: There was no single driver of performance this quarter, rather we recorded strong balanced performance across all of our businesses.
Lynn Harton: Loan growth accelerated at the end of the quarter, reaching a 5% annualized growth rate with several different product types contributing.
Lynn Harton: Deposit growth totaled almost 4% annualized during the quarter with seasonal growth in public funds driving those results.
Lynn Harton: As the fed lowered short term rates. This quarter, we were able to decrease deposit costs by 15 basis points.
Lynn Harton: Nearly offsetting the 21 basis point decline in loan yields.
Lynn Harton: Our overall margin was down seven basis points, but net interest revenue increased by $1 1 million over the previous quarter.
Lynn Harton: Credit continues to reflect solid economic conditions in our footprint.
Lynn Harton: Total net charge offs were 21 basis points, our lowest rate since Q2 of 'twenty three.
Lynn Harton: Other credit metrics were also stable at low levels.
Lynn Harton: Expenses were well managed essentially flat with the third quarter.
Lynn Harton: Our operating efficiency improved to 55%.
Lynn Harton: We continue to have ample liquidity to fund growth and are looking forward to our opportunities in 2025, including the expansion of our South Florida footprint with American National Bank.
Speaker Change: Jefferson why don't you cover the quarter in more detail now.
Jefferson: Will do thank you Ann and good morning to everyone I'm going to start on page five and laid off by talking about deposits.
Jefferson: We enjoyed $213 million of deposit growth or three 7% annualized.
Jefferson: We had stable DDA and we get the benefit of seasonally strong public funds.
Jefferson: Our strong deposit growth funded substantially all of our loan growth in the quarter.
Jefferson: We were proactive in lowering our deposit cost are.
Jefferson: Our cost of total deposits improved by 15 basis points in the quarter.
Jefferson: We have a total deposit beta of 22% so far but we believe we are still on pace for a high 30% range total deposit beta through the cycle.
Jefferson: On page six but go into some more detail on deposits.
Jefferson: In particular, we show our opportunity to reprice Cds here in the first quarter.
Jefferson: We have been shortening our CD book over the past year, and we have a significant amount of dollars maturing in the first quarter.
Jefferson: Specifically, we have over half of our CD book maturing, which is $1 $8 billion at $4 one 4%.
On page six but go into some more detail on deposits in.
Jefferson: We should be able to reprice. These in the $3 50 range given the current environment.
Speaker Change: In particular, we show our opportunity to reprice Cds here in the first quarter.
Jefferson: On page seven we turn to the loan portfolio, where our growth picked up nicely specifically in areas that we are targeting.
Speaker Change: We have been shortening our CD book over the past year, and we have a significant amount of dollars maturing in the first quarter.
Jefferson: We had 13% annualized growth in C&I.
Speaker Change: Specifically, we have over half of our CD book maturing, which is $1.8 billion at 4.14%.
Jefferson: Which includes owner occupied CRE.
Jefferson: And 15% annualized growth and that Davita book.
Speaker Change: We should be able to reprice these and the $3 50 range given the current environment.
We have also been targeting our HELOC product for growth and we were pleased with 20% annualized growth in that area.
Speaker Change: On page seven we turn to the loan portfolio, where our growth picked up nicely specifically in areas that we are targeting.
Jefferson: Turning to page eight where we highlight some of the strength of our balance sheet. We believe that our balance sheet is in good position with just a small amount of wholesale borrowings and very limited broker deposits.
Speaker Change: We had 13% annualized growth in C&I.
Speaker Change: Which includes owner occupied CRE.
Speaker Change: And 15% annualized growth and then the fetus book.
Jefferson: Our loan to deposit ratio stayed at 78% in Q4 after moving down from the 80% level with the sale of our manufactured housing portfolio in Q3.
Speaker Change: We have also been targeting our HELOC product for growth and we were pleased with 20% annualized growth in that area.
Speaker Change: Turning to page eight where we highlight some of the strength of our balance sheet. We believe that our balance sheet is in good position with just a small amount of wholesale borrowings and very limited broker deposits.
Our CET one ratio remained over 13% in the quarter.
Jefferson: On page nine.
Jefferson: Looking at capital in more detail, we had increases in most of our regulatory capital ratios and our TCE and all of our capital ratios remain above peers.
Speaker Change: Our loan to deposit ratio stayed at 78% in Q4 after moving down from the 80% level with the sale of our manufactured housing portfolio in Q3.
Jefferson: If you recall last quarter, we took the opportunity to call a small amount or $8 million of trust preferred that save some money and to help the margin.
Speaker Change: Our CET one ratio remained over 13% in the quarter.
Jefferson: We took a similar action in the fourth quarter redeeming $60 million of subordinated debt.
Speaker Change: On page nine.
Looking at capital in more detail, we had increases in most of our regulatory capital ratios and our TCE and all of our capital ratios remain above peers.
Jefferson: This debt was about to flip from the low 5% range to the low 8% range.
Speaker Change: If you recall last quarter, we took the opportunity to call a small amount or $8 million of trust preferred that save some money and to help the margin.
Jefferson: So it saves us about $1.8 million in 2025.
Jefferson: It was also just beginning to lose tier two capital treatment.
We took a similar action in the fourth quarter redeeming $60 million of subordinated debt.
Jefferson: The redemption moved our capital ratio down by about 30 basis points and a total capital ratio ended up down 20 basis points in the quarter.
Speaker Change: This debt was about to flip from the low 5% range to the low 8% range.
Jefferson: The redemption also generated a $2 $2 million gain as the debt came to us in an acquisition and was marked on the books at a premium.
Speaker Change: So it saves us about $1.8 million in 2025.
Speaker Change: It was also just beginning to lose tier two capital treatment.
Jefferson: This gain is called out on page four as a notable item.
Speaker Change: The redemption moved our capital ratio down by about 30 basis points and a total capital ratio ended up down 20 basis points in the quarter.
Jefferson: Moving on to spread income and the margin on page 10, we achieved 2% annualized growth in spread income we.
Jefferson: We were pleased with this outcome given the sale of the manufactured housing portfolio.
Speaker Change: The redemption also generated $2 $2 million gain that's the that came to us and an acquisition unless mark on the books at a premium.
Jefferson: That negatively affected the average loan balances.
Jefferson: Excluding the MH impact, we estimate that our spread income growth was in the 4% to 5% annualized range this quarter.
Speaker Change: This gain is called out on page four as a notable item.
Speaker Change: Moving onto spread income and the margin on page 10, we achieved 2% annualized growth in spread income.
Jefferson: The margin came in seven basis points lower than the fourth quarter. The decrease was in line with our expectations and was explainable by the manufactured housing impact of two basis points.
Speaker Change: We were pleased with this outcome given the sale of the manufactured housing portfolio that negatively affected the average loan balances.
Jefferson: And the mix changed due to public funds seasonality of five basis points.
Speaker Change: Excluding the M H impact, we estimate that our spread income growth was in the 4% to 5% annualized range this quarter.
Jefferson: Excluding these two items our margin was flat, which we view as a good outcome, while we work on executing to achieve the high 30% total deposit beta as compared to the 22% achieved so far.
Speaker Change: The margin came in seven basis points lower than the fourth quarter. The decrease was in line with our expectations and was explainable by the manufactured housing impact of two basis points.
Jefferson: Moving to page 11 on an operating basis noninterest income was up $5 $2 million from last quarter.
Speaker Change: The mix changed due to public funds seasonality of five basis points.
Jefferson: The growth came despite a $1.6 million shrinkage in wealth income fees with the sale of our Finch West hub on October 1st.
Speaker Change: Excluding these two items our margin was flat, which we view as a good outcome, while we work on executing to achieve the high 30% total deposit beta as compared to the 22% achieved so far.
Jefferson: The total fee income increase was benefited by a $3 $5 million MSR write up.
Speaker Change: Moving to page 11 on an operating basis noninterest income was up $5.2 million from last quarter.
Jefferson: And a one 4 million realized gain on the sale of equity securities.
Jefferson: It was offset by $3 $3 million and securities losses.
Speaker Change: The growth came despite a $1.6 million shrinkage in wealth income fees with the sale of our fin trusts hub on October 1st.
Jefferson: Including the debt redemption gain I mentioned before a run rate of non interest income is closer to the $36 million range.
Speaker Change: The total fee income increase was benefited by a $3 $5 million MSR write up.
Jefferson: Besides the highlighted items, we had strong results in debit card income customer swap income and treasury management fees that drove quarter to quarter growth on a core basis.
Speaker Change: And a $1.4 million realized gain on the sale of equity securities.
Speaker Change: It was offset by $3 $3 million and securities losses.
Jefferson: Our gain on sale of SBA and the VITAS loans with similar to last quarter adjusting for the manufactured housing sale.
Speaker Change: Including the debt redemption gain I mentioned before a run rate of non interest income is closer to the $36 million range.
Jefferson: Operating expenses on page 12 came in flat at $149 million.
Speaker Change: Besides the highlighted items, we had strong results and debit card income customer swap income and treasury management fees that drove quarter to quarter growth on a core basis.
Jefferson: We had about $1.2 million of tail expenses from Penn trusts that we expect not to repeat next quarter.
Speaker Change: Our gain on sale of SBA and Davita phones was similar to last quarter adjusting for the manufactured housing sale.
Moving to credit quality.
Jefferson: Net charge offs were improved to 21 basis points in the quarter.
Speaker Change: Operating expenses on page 12 came at flat at $149 million.
Jefferson: Recall that our net charge offs, excluding the MH sale was 28 basis points last quarter.
Jefferson: Overall losses were lower.
Speaker Change: We had about $1.2 million of tail expenses from Pentrust that we expect not to repeat next quarter.
Jefferson: <unk> losses were a little bit higher and contributed 13 basis points of total losses up from 12 basis points last quarter.
Speaker Change: Moving to credit quality.
Jefferson: Excluding MH and Davita such losses.
Speaker Change: Net charge offs were improved to 21 basis points in the quarter.
Jefferson: The bank's losses were low and stable at just eight basis points down.
Speaker Change: Recall that our net charge offs, excluding the MH sale was 28 basis points last quarter.
Jefferson: Down from 15 basis points last quarter.
Speaker Change: And other credit statistics M P. As in past dues were improved.
Speaker Change: Overall losses were lower.
Speaker Change: <unk> losses were a little bit higher and contributed 13 basis points of total losses up from 12 basis points last quarter.
Speaker Change: Special mentioned substandard loans moved slightly higher.
Speaker Change: Well finish on page 14, with the allowance for credit losses.
Excluding M H and Davita such losses.
Speaker Change: Our loan loss provision was $11 $4 million in the quarter and more than covered our $9 $5 million and net charge offs.
Speaker Change: The bank's losses were low and stable.
Speaker Change: Just eight basis points down from 15 basis points last quarter.
Speaker Change: We also covered loan growth with the provision and the reserve stayed stable at one 2% of loans.
Speaker Change: Other credit statistics M P. As in past dues were improved.
Speaker Change: Special mentioned substandard loans moved slightly higher.
Speaker Change: We still have $9 $9 million of reserves set aside.
Speaker Change: I'll finish on page 14, with the allowance for credit losses, our loan loss provision was $11 $4 million in the quarter and more than covered our $9 $5 million and net charge offs.
Speaker Change: It's a special provision for loans in our non county area in North Carolina for Hurricane Helene.
Speaker Change: We already had $3 $1 million in reserve on these loans before so the total reserve is $13 million on these loans in the nine counties or three 5% of total loans there.
Speaker Change: We also covered loan growth with the provision and the reserve stayed stable at one 2% of loans.
Speaker Change: We still have $9.9 billion of reserves set aside.
Speaker Change: Our update is that we have $27 million in storm related deferrals.
Speaker Change: A special provision for loans that are non county area in North Carolina for a hurricane Halloween.
Speaker Change: $18 million of which occurred in the non county area, where we have the special reserve.
Speaker Change: We already had $3 $1 million in reserve on these loans before so the total reserve is $13 million on these loans in the nine counties or three 5% of total loans there.
Speaker Change: We believe that our current provision is sufficient to cover any potential losses.
Lynn Harton: That I'll pass it back to Lynn.
Lynn Harton: Thank you Jefferson.
Speaker Change: Before we open for questions I want to give a special welcome to Ginger Martin and her team at American National Bank. It has been a pleasure getting to know them and I'm very confident they will be an outstanding addition to our south Florida team.
Speaker Change: Our update is that we have $27 million in storm related deferrals.
Speaker Change: $18 million of which occurred in the non county area, where we had the special reserve.
Speaker Change: I'm also glad to welcome Matthew Bruno as our new leader for our Miami operations.
Speaker Change: We believe that our current provision is sufficient to cover any potential losses.
Speaker Change: Matthew was a 25 year veteran of the market well respected and is already making a tremendous positive impact on our business there.
Lynn Harton: I'll pass it back to Lynn.
Lynn Harton: Thank you Jefferson.
Lynn Harton: Before we open for questions I want to give a special welcome to Ginger Martin and her team at American National Bank. It has been a pleasure getting to know them and I'm very confident they will be an outstanding addition to our south Florida team.
Speaker Change: And finally I want to recognize that 2025 is United 75th anniversary, we plan on making it a great year and we look forward to sharing that with you and with that I'd like to open the floor for questions.
Lynn Harton: I'm also glad to welcome Matthew Bruno as our new leader for our Miami operations.
Speaker Change: We will now begin the question and answer session.
Lynn Harton: Matthew was a 25 year veteran of the market well respected and is already making a tremendous positive impact on our business there.
Speaker Change: Ask a question. Please press Star then one when you have touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Lynn Harton: And finally I want to recognize that 2025.
Lynn Harton: As United 75th anniversary, we plan on making it a great year and we look forward to sharing that with you and with that I'd like to open the floor for questions.
Speaker Change: Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
Lynn Harton: Thank you we will now begin the question and answer session.
Speaker Change: And the first question will come from Michael Rose with Raymond James. Please go ahead.
Lynn Harton: To ask a question. Please press Star then one on you have touchtone phone.
Speaker Change: If you're using a speakerphone please pick up your handset before pressing the keys.
Michael Rose: Hey, good morning, everyone. Thanks for taking my questions maybe.
Speaker Change: Any time your question has been addressed and you would like to withdraw your question. Please press Star then two.
Michael Rose: Maybe just wanted to start on loan growth was really good to see the C&I growth just wanted to get some color around what drove that was it increased utilization or was it just market share gain and then just as my kind of contemplate.
Speaker Change: At this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Michael Rose with Raymond James. Please go ahead.
Michael Rose: 2025, and an outlook.
Michael Rose: I would think that there'll be some some headwinds and some of the portfolios like senior care in multifamily.
Michael Rose: Hey, good morning, everyone. Thanks for taking my questions.
Michael Rose: But it does seem like you know some of the the CRE and C&I.
Michael Rose: Maybe just wanted to start on on loan growth was really good to see the C&I growth just wanted to get some color around what drove that was it increased utilization or was it just market share gain and then just as we kind of contemplate <unk>.
Michael Rose: Categories could be some some tailwind, particularly if the economy.
Michael Rose: Perform so maybe you can just kind of give some color there I'd appreciate it thanks.
Michael Rose: 2025, and an outlook.
Rich: Good morning, Michael This is rich for.
Speaker Change: For the Q1 forecast, we're expecting a similar quarter to Q4 or slightly better.
Michael Rose: I would think there's there'll be some some headwinds and some of the portfolios like senior care multifamily.
Michael Rose: But it does seem like you know some of the the CRE and C&I.
Speaker Change: Some of the drivers of business owner confidence is certainly up pipelines are very strong talking with the credit officers their throughput, they're seeing more deals than they've ever seen and I feel like our new higher than growth initiatives have really paid off.
Michael Rose: Categories could be some some tailwind.
Michael Rose: Particularly if the economy.
Michael Rose: Perform so maybe you can just kind of give some color there I'd appreciate it thanks.
Michael Rose: Good morning, Michael This is rich for the Q1 forecast, we're expecting a similar quarter to Q4 or slightly better.
Speaker Change: Lastly, I want to point out that Florida led the bank in Q4 loan production, followed by North Carolina, and South Carolina last quarter that was Tennessee. So for two quarters back to back the new markets have been leading the bank. So we're very pleased with that.
Michael Rose: Some of the drivers business owner confidence is certainly up pipelines are very strong talking with the credit officers their throughput, they're seeing more deals than they've ever seen and I feel like our new higher than growth initiatives have really paid off.
Speaker Change: In terms of other drivers yeah, you're right C&I was up 20% equipment finance up 15% income producing create nine and a half and we're very pleased that owner occupied Cree, which is a real big initiative for us at the end of the year was up 9% in terms of 2025, we're very optimistic it's probably too early to talk.
Michael Rose: Lastly, I want to point out that Florida led the bank in Q4 alone production, followed by North Carolina, and South Carolina.
Michael Rose: Last quarter that was Tennessee, so for two quarters back to back the new markets have been leading the bank. So we're very pleased with that.
Speaker Change: Numbers for the year.
Michael Rose: In terms of other drivers yeah, you're right C&I was up 20% equipment finance up 15% income producing create nine and a half and we're very pleased that our occupied Cree, which is a real big initiative for us at the end of the year was up 9% in terms of 2025, we're very optimistic it's probably too early to talk.
Speaker Change: Okay helpful and then Jefferson I appreciate all the color and the moving parts on the margin.
Speaker Change: Just as we think about some of the yeah, you lay out some of the loan repricing opportunities, but if you can just give us.
Speaker Change: Kind of a.
Speaker Change: Some color on the repricing on the asset side and liability side and how we should expect the margin on a core basis that kind of trend from here. Thanks.
Michael Rose: Numbers for the year.
Okay helpful and then Jefferson I appreciate all the color and the moving parts on the margin.
Speaker Change: I still think we're slightly asset sensitive if you were to bring the whole curve down now.
Michael Rose: Just as we think about some of the yeah.
Speaker Change: What's occurred here as a <unk>, that's actually positive for us with the steeper curve, but still with a rate cut there's a tiny elements into until you get the lag of deposits to be a price back down to where we think our target for deposit betas arm.
Michael Rose: Some of the loan repricing opportunities, but if you can just give us.
Michael Rose: Yeah.
Michael Rose: Some color on the repricing on the asset side and liability side and how we should expect the margin on a core basis that kind of trend from here. Thanks.
Speaker Change: So taken taken that together, we are putting new loans on and a seven and a quarter a range. If you look at sort of December sort of pricing. So any quarter, you don't get a rate cut.
Michael Rose: So I still think we're slightly asset sensitive if you were to bring the whole curve down now now what's occurred here is a tilt that's actually positive for us with the steeper curve.
Speaker Change: Should see a little bit of loan yield improvement from the back book repricing in the new loans coming on at seven and a quarter ish.
Michael Rose: But still with a rate cut or thoughts on timing elements into until you get the lag of deposits to be a price back down to where we think our target for deposit betas arm. So taken taken that together, we are putting new loans on and a seven and a quarter.
Speaker Change: We should get oil mix change benefit in the first quarter with a slight halving of the public funds.
Speaker Change: When had mentioned that we had a quarter loan growth was a late quarter. So if we get the benefit and the average balances in the first quarter, which is nice we expect good loan growth in the first quarter as well.
Michael Rose: Range. If you look at sort of December sort of pricing. So any quarter, you don't get a rate cut we should see a little bit of loan yield improvement from the back book repricing and the new loans coming on at seven and a quarter ish.
Speaker Change: Combine all that together and I think there were five to 10 basis points up on the margin.
Michael Rose: We should get oil mix change benefit in the first quarter with a slight halving of the public funds.
Speaker Change: In the first quarter and as you go into 25, I think youre going to see again, you should see improvement in the margin in any quarter, you don't get a rate cut and then even the ones you get a rate cut I think that we can go back and get that high thirties deposit beta in there and make it neutral over time.
Michael Rose: When it had mentioned that we had.
Michael Rose: Quarter loan growth was a late quarter. So if we get the benefit and the average balances in the first quarter, which is nice we expect good loan growth in the <unk>.
Michael Rose: First quarter as well so combine all that together and I think there were five to 10 basis points up on the margin and the first quarter and as you go into 25, I think you're going to see again, you should see improvement in the margin in any quarter, you don't get a rate cut and then even the ones you get a rate cut I think that we can go back.
Speaker Change: I appreciate all that color Jefferson very helpful. And then maybe just one final one for me for Lynn just as it relates to M&A, obviously, the ANV transaction. Nice addition to what your Goldman South Florida can you just talk about.
Speaker Change: What's changed in your mind since the election and it does seem like you know banks are going to be allowed to do maybe a few deals at once or per year any updated thoughts there and does what youre looking for potentially change under this new administration. Thanks, Yeah sure. Michael So of course, we are very excited about American national.
Michael Rose: And you know get that high thirties.
Michael Rose: The beta in there and make it neutral over time.
Michael Rose: Okay.
Speaker Change: Appreciate all that color Jefferson very helpful. And then maybe just one final one for me for Lynn just as it relates to M&A, obviously, the ANV transaction. Nice addition to what your Goldman South Florida can you just talk about.
Speaker Change: It's it's it's a small deal high very high quality just tuck in.
Speaker Change: What's changed in your mind since the election and it does seem like you know banks are going to be allowed to do maybe a few deals at once or per year any updated thoughts there and does what youre looking for potentially change under this new administration. Thanks, Yeah sure. Michael So of course, we are very excited about American national.
Speaker Change: And with that we have always been very confident that we have the capacity and the.
Speaker Change: Ability to do one additional one.
Speaker Change: This year in addition to American national and whether or not that happens of course depends on the opportunities that are out there.
Speaker Change: It's it's it's a small deal how it very high quality just a tuck in.
Speaker Change: There's definitely been a pickup in conversations.
Speaker Change: Since the since the election, there is just a better environment overall for M&A, if people are kind of getting their balance sheets.
Speaker Change: And with that we have always been very confident that we have the capacity and the ability.
Speaker Change: Better understood and better taken care of of course, the approval side is anticipated to be better you know honestly for us the size deals that we've done you know up to 15% which would put.
Speaker Change: Our ability to do one additional one.
Speaker Change: This year in addition to American national and whether or not that happens of course depends on the opportunities that are out there there's definitely been a pickup in conversations since the since the election. There was just a better environment overall for M&A. If people are kind of getting their balance sheets.
Speaker Change: But you know 454 5 billion is the top end so those smaller deals that we do we.
Speaker Change: Not seen and wouldn't have anticipated any change.
Speaker Change: Better understood and better taken care of of course, the approval side Ah is anticipated to be better.
Speaker Change: They've always been very well easy easy to get approved so it wouldn't it that part is not affecting as much but I just think the general atmosphere is very conducive and we would certainly expect to see some opportunities during 'twenty five.
Speaker Change: Honestly for us the size deals that we've done you know up to 15%, which would put you know 454 5 billion is the top end. So there's smaller deals that we do we will.
Speaker Change: Great. Thanks for taking all my questions guys.
Speaker Change: <unk> not seen and wouldn't have anticipated any change they've always been very well easy easy to get approved so it wouldn't it that part is not affecting as much but I just think the general atmosphere.
Catherine Mealor: The next question will come from Catherine Mealor with <unk>. Please go ahead.
Catherine Mealor: Thanks, Good morning.
Catherine Mealor: Okay.
Catherine Mealor: Hum.
Speaker Change: It was very conducive and we would certainly expect to see some opportunities during 'twenty five.
Catherine Mealor: Just comment on credit.
Catherine Mealor: A little bit about your outlook for manufactured housing.
Speaker Change: Oh, great. Thanks for taking all my questions guys.
Catherine Mealor: Our balance sheet.
Catherine Mealor: This is a little bit higher core.
Katherine Miller: The next question will come from Katherine Miller with K B W. Please go ahead.
Catherine Mealor: Our bank has just seen first of all losses is there a way to think about what an appropriate level of kind of provisioning or charge off we should expect.
Speaker Change: Thanks, Good morning.
Katherine Miller: Good morning.
Catherine Mealor: How come the year.
Catherine Mealor: Yeah, Hey, Catharine its Rob.
Katherine Miller: Just a quick comment on credit.
Good morning.
Katherine Miller: You talked a little bit about your outlook for you that it was got manufactured housing out of the <unk>.
Catherine Mealor: As we had $58 million in charge offs in 2020 for about 14 of that was related to manufactured housing either from regular charge offs before the sale or created by the sale. So that gets you down to $44 million and I'm I'm kind of thinking about that as being a good number.
Speaker Change: T. J. This is a little bit higher core your core bank has just been festival losses is there a way to think about what is the appropriate level of kind of provisioning or charge off we can expect.
In this upcoming year.
Rob: Hey, Catherine it's Rob.
Catherine Mealor: For the outlook for 2025, right now things feel very stable.
Speaker Change: The way I'm wondering what it is we had $58 million in charge offs in 2020 for about 14 of that was related to manufactured housing either from regular charge offs before the sale or are created by the sale. So that gets you down to $44 million and I'm I'm kind of thinking about that.
Catherine Mealor: And so that's kind of the way I'm I'm thinking about it for next year.
Catherine Mealor: Okay great.
And then.
Catherine Mealor: Jefferson you mentioned that some of the other items in fees will come out, but as you think about kind of the outlook can you talk to us about your outlook for you would have viewed as loan sales and SBA.
Speaker Change: That is being a good number for the outlook for 2025, right now things feel very stable and so that's kind of the way I'm I'm thinking about it for next year.
Catherine Mealor: And then.
Catherine Mealor: And if you just kind of overall fee secret or 'twenty five.
Speaker Change: Yeah, I'll start with that and I know rich will have some things to join in there on the SBA side and and mortgage really.
Okay, Great and then.
Speaker Change: Hum Jefferson you mentioned that some of the other items in fees will come out, but as you think about kind of the outlook can you talk to us about your outlook for maybe this one is sales and SBA.
Speaker Change: Mortgage well, maybe I'll pass it to rich first and then I'll come back to me on it on anything else, So maybe mortgage and SBA and then I'll come back with any other pieces of it sure in terms of.
Speaker Change: And then maybe.
Speaker Change: Good morning, Katherine in terms of mortgage volume I'm. The MBA is forecasting 10% down for 2020 five and we're forecasting a similar type number.
Speaker Change: Just kind of overall fee secret for 25.
Speaker Change: Yeah, I'll start with that and I know rich will have some things to join in there on the SBA side and air mortgage really mortgage well, maybe I'll pass it to rich first and then I'll come back to me on it on the air.
Speaker Change: In terms of S. P. A M. If you recall from last call. The SBA changed the regulations on how you when you can sell on a commercial construction loan, which we do a lot of and the SBA side and so it's not changing the gain on sale, but it is just changing the timing when you're allowed to sell and so that's all pushed.
Speaker Change: And also maybe mortgage and SBA and then I'll come back with any other pieces of it sure in terms of finished good morning, Katherine in terms of mortgage volume I'm. The MBA is forecasting 10% down for 2025, and we're forecasting a similar type number.
Speaker Change: So December Q4 was lower and that is going to push into Q1 and Q2. So we're expecting a little bit better Q1 than we did Q1 a year ago.
Speaker Change: In terms of S. P. A M. If you recall from last call. The SBA changed the regulations on how you when you can sell on a commercial construction loan, which we do a lot of and the SBA side and so it's not changing the gain of sale, but it is just changing the timing when you're allowed to sell and so that's all.
Speaker Change: And I'll throw in on Nevada, we had been selling this quarter two was in the $20 million to $30 million range I would expect that to be a little smaller maybe that $10 million to $20 million range per quarter.
Speaker Change: <unk> December Q4 was lower and that's going to push into Q1 and Q2, So we're expecting a little bit better Q1 than we did Q1 a year ago.
Speaker Change: Next year, mainly because it's more profitable to hold it on the balance sheet, we have good capital and liquidity, so we might hold a little bit more there.
Speaker Change: And I'll throw it on Nevada, we had been selling this quarter two was in the $20 million to $30 million range I would expect that to be a little smaller maybe that $10 million to $20 million range per quarter.
Speaker Change: Especially to us as we think our overall loan growth is going to pick up we have more room on the balance sheet to keep more in davita phones as well so I would expect to see.
Speaker Change: And Audi to change on the SBA like Rich said and and good growth. There then I would expect davita has to be a little down on their loan sales and 25.
Speaker Change: Next year, mainly because it's more profitable to hold it on the balance sheet. We have good capital on liquidity, So we might hold a little bit more there.
Speaker Change: Okay, great very helpful. Thank you.
Speaker Change: Especially to us as we think our overall loan growth is going to pick up we have more room on the balance sheet to keep more in davita phones as well. So I would expect the seasonality to change on the SBA like rich said and and good growth. There then I would expect davita has to be a little down on their loans.
Speaker Change: The next question will come from Christopher <unk> with.
Speaker Change: Janney Montgomery Scott. Please go ahead.
Speaker Change: Deposit pricing question as you look at M&A, what's the likelihood of reprice those deposits on the front end and it is that an opportunity.
<unk> and 'twenty five.
Speaker Change: Bigger this year than it had been in the past.
Speaker Change: Okay, great very helpful. Thank you.
Well I'll start with Atlanta might have something to add on there we it kind of depends on the banking by we have some banks have great core deposits like like ours and the opportunity is not as big other banks that we see have very high deposit cost and so we had the opportunity to use our liquidity to.
Speaker Change: The next question will come from Christopher Merrimack with Janney Montgomery Scott. Please go ahead.
Christopher Merrimack: Very excited deposit pricing question as you look at M&A, what's the likelihood or reprice those deposits on the Friday is that an opportunity.
Bigger this year than it had been in the past.
Speaker Change: To get that down so we're.
Speaker Change: We're seeing.
Christopher Merrimack: Well I'll start and Glenn may have something to add on there we it kind of depends on the bank you buy we have you know some banks have great core deposits like like ours and the opportunity is not as big other banks that we see have very high deposit costs and so we had the opportunity to use our liquidity to us.
Speaker Change: Our flow of both of those so it really depends on.
Speaker Change: What bank comes across the train of thought there.
Speaker Change: Yeah.
Speaker Change: I will say I'll add one more thing on there is that every bank you see opportunity in the marks on the on the asset side. So.
Speaker Change: The ability with our 13%.
Speaker Change: Tier one capital to absorb a hallmark to absorb a securities Mark and then have a higher margin coming out of it is is very high. So I think M&A can really help you with the marks on the asset side, but it really is a bank dependent on the liability side as well said okay.
Christopher Merrimack: To get that down so we're.
Christopher Merrimack: We're seeing a flow of both of those so it really depends on.
Christopher Merrimack: What bank it comes across the trains out there.
Christopher Merrimack: Yeah.
Christopher Merrimack: I will say I'll add one more thing on there is that every bank you see opportunity in the marks on the on the asset side. So you know the ability with our 13%.
Speaker Change: Great. Thank you for that Jefferson and then just a follow up for Rob on the beat us.
Speaker Change: There is a possibility for an adidas to.
Christopher Merrimack: Tier one capital to absorb a hallmark or to absorb a securities Mark and then have a higher margin coming out of it is very high. So I think M&A can really help you with the marks on the asset side, but it really is a bank dependent on the liability side as well said.
Speaker Change: For the losses to go down this year it kind of moderate from what we've seen.
Speaker Change: Well certainly on the over the road trucking, we expect losses to moderate this year right. So we started the year with a $44 million over the road portfolio and we're starting 2025 now with a 26 million dollar portfolio, so down pretty dramatically.
Speaker Change: Great. Thank you for that Jefferson and then just a follow up for Rob on the fetus.
Speaker Change: There is a possibility for an adidas to for losses to go down this year and kind of moderate from what we see.
Speaker Change: And I would expect losses, so we had $7 million seven and a half million dollars in losses on the over the road portfolio in 'twenty 'twenty, four and I would expect that number to be.
Speaker Change: Well certainly on the over the road trucking, we expect losses to moderate this year right. So we started the year with a $44 million over the road portfolio and we're starting 2025 now with a 26 million dollar portfolio, so down pretty dramatically.
Speaker Change: Closer to $4 million in 2025, so I think that'll be a driver there on the davita as losses.
And I would expect losses, you know so we had $7 million seven and a half million dollars in losses are the over the road portfolio in 'twenty 'twenty, four and I would expect that number to be closer to $4 million in 2025, So I think that'll be a driver there on the davita.
Speaker Change: Great Rob Thanks, very much I appreciate it.
Speaker Change: The next question will come from Gary Tenner with D. A Davidson. Please go ahead.
Gary Tenner: Thanks, Good morning, everybody.
Gary Tenner: I wanted to ask Jefferson about the CD maturities you mentioned, obviously, the you know half of them are in the first quarter and then you've got another sizable slug in the second quarter. How are you thinking about kind of managing the duration of the renewables. There from a rate perspective are really trying to get a sense of whether there'd be another opportunity to work pricing.
Speaker Change: Losses.
Speaker Change: Great Rob Thanks, very much I appreciate it.
Speaker Change: The next question will come from Gary Tenner with D. A Davidson. Please go ahead.
Gary Tenner: Down more over the course of the year AR as we move later into 2020 five.
Gary Tenner: Thanks, Good morning, everybody.
Gary Tenner: I wanted to ask Jefferson about the CD maturities you mentioned, obviously, the you know half of them are in the first quarter and then you've got another sizable slug in the second quarter. How are you thinking about kind of managing the duration of the renewables. There from a rate perspective are really trying to get a sense of whether that'd be another opportunity to work pricing.
Speaker Change: Thanks, Gary that's a great question. We typically are most popular C. D has been in the 11 months of 13 months or 12 months C. D and so historically at the bank has been closer to an average of about a year out.
Speaker Change: With the expectation of rates coming down we really shortened that we've made our best rate to seven months and we made at the four month and that's what's giving us this opportunity here.
Gary Tenner: Down more over the course of the year AR as we move later into 2020 five.
Gary Tenner: Thanks, Gary that's a.
Speaker Change: Great question, we you know it's typically our most popular C. D has been in the 11 months or 30 months or 12 months C. D and so historically at the bank spend closer to an average of about a year out.
Speaker Change: As we reprice. These we are now moving at our pricing to be more and more.
Speaker Change: Sequel, or opportunistic at each price point, so what you're going to see is that lengthening out of these C DS and you'll see more growth in the 11 month 13 month 12 month, CD, it'll take a little bit, but what you should see is a gradual lengthening of the CD book versus where it is now.
Speaker Change: With the expectation of rates coming down we really shortened that we made our best rate of seven months and we've made at the four month and that's what's giving us this opportunity here.
Speaker Change: As we reprice. These we are now moving at our pricing to be more more equal or opportunistic at each price point, so what you're going to see is that lengthening out of these C DS and you'll see more growth in the 11 month 13 months 12 months C. D. It will take a little bit but the.
Speaker Change: Thank you.
Oh hi.
Speaker Change: This will conclude our question and answer session I would like to turn the conference back over to Lynn Harton for any closing remarks. Please go ahead.
Speaker Change: Well once again, many thanks for joining the call for your interest we look forward to continuing to be with you through the year.
What you should see is a gradual lengthening of the CD book versus where it is now.
Speaker Change: It would be a great win so take care and have a great day.
Speaker Change: Thank you.
Speaker Change: Oh hi.
Uh huh.
Speaker Change: This will conclude our question and answer session I would like to turn the conference back over to Lynn Harton for any closing remarks. Please go ahead.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Well once again, many thanks for joining the call for your interest we look forward to continuing to be with you through the year, we expect it to be a great. One so take care and have a great day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].