Q4 2024 FB Financial Corp Earnings Call
Conference Operator: And good morning, everyone. This is the conference operator. We thank you for dialing in to the FB Financial Corporation's fourth quarter 2024 NACE 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.
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A Presentation of Mr. Williams
Thank you for your time, and I'll see you in the next video.
Speaker Change: Good morning, everyone, and welcome to the FB Financial Corporation's fourth quarter 2024 earnings conference call.
Speaker Change: Hosting the call today from FB Financial are Chris Holmes, President and Chief Executive Officer and Michael Mettee, Chief Financial Officer.
Speaker Change: 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.
Speaker Change: and this morning's presentation are available on the investor relations page of the company's website.
Speaker Change: at www.firstbankonline.com and on the Securities and Exchange Commission's website at www.sec.gov.
Speaker Change: 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.
Conference Operator: At this time, all participants have been placed in a listen-only mode.
The call will be open for questions after the presentation.
Speaker Change: During this presentation FD Financial may make comments which constitute forward-looking statements under the federal securities laws.
Overlooking statements are based on management's current expectations and assumptions.
Speaker Change: 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.
Speaker Change: Many of such factors are beyond FB Financial's ability to control or predict.
Speaker Change: And listeners are cautioned not to put undue reliance on such forward-looking statements.
Speaker Change: 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.
Speaker Change: Except as required by law, FBE Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation.
Speaker Change: Whether as a result of new information, future events, or otherwise.
Speaker Change: In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G.
Speaker Change: 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.
Conference Operator: I would now like to turn the floor over to Chris Holmes, FB Financial's President and CEO.
Chris Holmes: All right, thank you, Jamie, and thank you for joining the call this morning. We always appreciate your interest in FD Financial.
For the quarter, we reported EPS of 81 cents.
Chris Holmes: and an adjusted EPS of $0.85 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% since our IPO in 2016.
Chris Holmes: 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%.
Chris Holmes: 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.
Chris Holmes: 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.
Chris Holmes: For the full year, we grew total assets about $553 million, or approximately 4.4%, funded through the growth of our quarter positive balances of $343.5 million, or about 3.3%.
Chris Holmes: 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 the continuation of those efforts.
This quarter's earnings resulted in a gap.
return on average assets of 1.14 percent.
Chris Holmes: and a return on average of Tangible Common Equity of 11.5%. Our capital position remains very strong as we reported Tangible Common Equity to Tangible Assets of 10.2% and a Preliminary CEP1 ratio of 12.8% in a Primary I'm sorry, preliminary
total risk-based capital ratio at 15.2 percent.
Chris Holmes: Our fourth quarter and full year 2024 results reflect the unique strengths of the company which continue to distinguish us among our peer group.
Chris Holmes: 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 resources
to provide product and technology depth and breadth.
Chris Holmes: 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.
Chris Holmes: 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.
Chris Holmes: 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.
Chris Holmes: 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.
Chris Holmes: Our team, which is a relatively younger team compared to our peers, continues to produce results for our customers and shareholders.
Chris Holmes: This history of success by this relatively young team gives us confidence in the staying power of our franchise and opportunity to generate meaningful long-term value.
Chris Holmes: 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 from us?
Chris Holmes: 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.
Chris Holmes: Our first priority has been and always will be organic growth.
Chris Holmes: 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.
Chris Holmes: We're also continuing to pursue new markets as we aim to take our banking model into markets that are contiguous with our footprint.
Chris Holmes: 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.
Chris Holmes: 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.
Chris Holmes: While much of the media coverage has moved on to other stories in the news cycle, our team views ASCO 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.
Chris Holmes: 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.
Chris Holmes: 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.
Chris Holmes: We remain interested in combination opportunities that align culturally, geographically, and financially.
We believe, like many,
Chris Holmes: that we're headed into a more accommodative M&A environment and we're prepared when the right opportunities present themselves.
Chris Holmes: 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.
Chris Holmes: 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.
Chris Holmes: I look forward to what we can accomplish together in 2025.
Chris Holmes: 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.
Michael Mettee: Non-interest expense was $73.2 million and provision expense came in at $7.1 million.
Michael Mettee: All in reported net income was $37.9 million or $39.8 million on an adjusted basis.
Michael Mettee: 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.
Michael Mettee: Full year non-interest expense was $294.9 million on an adjusted basis and provision expense came in at $12 million.
Michael Mettee: All in, our full year reported net income was $116 million or $159.3 million on an adjusted basis.
Michael Mettee: 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.
Michael Mettee: 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.
Michael Mettee: 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 earned in cash balances.
Michael Mettee: An increase in securities income of a million dollars also contributed to the overall increase due to the first full quarter benefit from the recent securities repositioning from the third quarter.
Michael Mettee: The securities yield was somewhat impacted by the change in benchmark rates, but still resulted in an increased yield of 19 basis points.
Michael Mettee: On the liability side, we executed on 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.
Michael Mettee: 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%.
Michael Mettee: 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% decrease noted this quarter.
Michael Mettee: 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.
Michael Mettee: Amidst a seasonal slowdown in mortgage, the company maintains strong fee income levels through our investment services and swap fees in the fourth quarter.
Michael Mettee: 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.
Michael Mettee: 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.
Michael Mettee: 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% compared to 58.4% in the prior quarter.
Michael Mettee: The decline in non-interest expense was concentrated within the banking segment, resulting in a banking segment co-efficiency ratio of 50.2% compared to 54.1% in the prior quarter.
Michael Mettee: The decrease is primarily attributable to adjustments in our short-term incentive expense as we right-size our accrual to close the year and a one-time franchise tax benefit recognized in the fourth quarter.
Michael Mettee: On credit, our charge-off levels were elevated this quarter driven by the full charge-off of a single previously reserved CNI relationship totaling $10.5 million.
Michael Mettee: We discussed this relationship in our second quarter call when we established the specific reserve.
Michael Mettee: 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.
Michael Mettee: As we communicated in the second quarter call, and as expected,
Michael Mettee: The charge-off drove a decrease in our overall ACL and non-performing 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.
Michael Mettee: Partially offsetting the decrease mentioned was a reserve bill to seven million primarily due to new allowance on loan growth and updates in our reserve modeling.
Michael Mettee: 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,
Michael Mettee: Our team remains focused on the deployment of that capital to deliver consistent long-term growth and earnings intangible book value
Michael Mettee: With that, I'll now turn the call back over to Chris.
Chris Holmes: All right, thanks Michael for the call. To conclude, we'll please...
Chris Holmes: with our 40 and 4-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 with all of you.
Chris Holmes: Thank you again for your interest in FB Financial and, Operator, at this time, we'd like to open the line for questions.
Conference Operator: 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 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 two.
Conference Operator: And our first question today comes from Stephen Skelton from Piper Sandler. Please go ahead with your question.
Hey, good morning, guys. I guess...
Conference Operator: 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.
front line bikers I mean it's it's a
Conference Operator: 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
Conference Operator: what we call a relationship manager or a producer. And it's a sort of an elite titling group in our organization. So I would say it's pretty much
Core
Speaker Change: 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
Speaker Change: opportunities, finding the right fit, you know, these things take years to recruit the right people.
Speaker Change: to fit what we do. And so it kind of come to you as they come to you. And that's what happened in the mortgage area. And then some of the people we've added in the East, we've been recruiting for a while.
Speaker Change: And then we added a couple in Asheville as well as we build out that team.
Speaker Change: 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...
Speaker Change: The reason, you notice we didn't used to mention that very much, but we mentioned it now, but it's because we're getting a lot of inbound opportunities and we expect that.
Speaker Change: 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.
Speaker Change: Yeah, that makes a lot of sense, and is that optimism around hiring what seems to give you more optimism around growth?
Speaker Change: 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
Speaker Change: Building deposits now for what you expect to be a ramp up and growth here next year
Speaker Change: Yes, so as we look forward and, you know, fourth quarter, which is not traditionally, you know, the most robust quarter, and we've had a net loan growth of 5.2 percent.
Speaker Change: As we've talked about through this year, there's a little bit of
what we anticipate next year from that hiring.
Speaker Change: 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 advantaged geography, which I talked about in the prepared remarks.
Speaker Change: 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
Speaker Change: They're calling, we abide very strictly by those, and 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.
No, got it. Okay.
Speaker Change: Yeah, that makes sense. And then maybe just lastly for me, oh, sorry, yep.
Speaker Change: 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...
Speaker Change: as we look into next quarter, you know, in anticipating loan growth, but we also have some...
Speaker Change: 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.
Speaker Change: 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,
Michael Mettee: 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, some decent size. So does what you're seeing and hearing, does it.
Michael Mettee: 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 change your mindset there at all?
Michael Mettee: 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 I think
Michael Mettee: under the previous regulatory leadership that was in place. I mean you were looking at one deal in a you know in an 18-month period and so I think you had to be quite
Michael Mettee: judicious about what you got into because the opportunity cost could be great and
Michael Mettee: 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...
Michael Mettee: Assign 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.
Speaker Change: Yeah, makes a lot of sense. Thanks for the time and congrats on a great 24th.
All right. Thanks, David.
Conference Operator: And our next question comes from Brett Rattaton from Hopi Group. Please go ahead with your question.
Hey guys, good morning.
Warren Bratton
Conference Operator: I wanted to start on credit and I'm sure you guys saw locally that, you know, Wheel Lock sold the LBAC tower, Phillips Plaza and Parkway Towers at pretty significant discounts.
Conference Operator: 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 office in Nashville, you know, any age properties, and if you guys had any kind of thoughts.
Conference Operator: median or average age for the portfolio for you guys and just how you see the commercial real estate market here.
transactions where they took place at a loss.
Conference Operator: 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.
Conference Operator: But I think you have to look at a couple of things there, Brett. First, I think fundamentally, I think the first question is, man, does that mean that we need to be questioning...
Bye.
Conference Operator: where Nashville is economically, or Middle Tennessee, let's say, because that's the market we zeroed in on with these transactions. And so...
Conference Operator: Is there something going on there fundamentally? I would say the answer to that is no and I'll just, you know, one
Conference Operator: growth momentum. Those things are still in place. In-migration still occurs.
Conference Operator: the corporate relocation pipelines are still solid, the inquiries are still solid with the
Conference Operator: the chamber and the ECD and so those things are still quite positive.
and that's what's driven a lot of the growth.
also at auction. Every one of those were older properties.
Conference Operator: Two of those, the first two you mentioned, were center city properties or downtown properties that were older buildings that had some occupancy issues. And if you notice, they were out of town, they were acquired by
Conference Operator: fun a fun 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.
Conference Operator: 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.
Conference Operator: 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.
Speaker Change: it you know 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 ours is no different
Speaker Change: Okay, but to the question, and I saw that on Broadway, that was interesting, Bryce, but the question I had was, those to me seem to be outliers.
Speaker Change: But they also seemed to indicate that, you know, maybe properties that were 35, 40 years old, you know, might have an issue. So the question was...
Speaker Change: 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.
Speaker Change: Yeah, we don't have that right here at our at our fingertips
And remember, our office portfolio...
Speaker Change: 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 sold here at a discount.
Speaker Change: 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.
Speaker Change: 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
Speaker Change: Yeah, Brad, you nailed it. It's loan-to-deposit ratio. Chris mentioned that earlier. We're down 85%. So 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...
on the deposit side.
Speaker Change: Keep in mind, you know half of our loan portfolios floating so and happens within 90 days you get a little bit of a Peak down and interest rates on the on the loan side. And so it thinks things stabilize, you know yield curve steepens, you know, we think we'll see some some margin expansion
Okay.
Speaker Change: I appreciate the call and congrats guys on a solid 2024.
Thanks, Rob. Thank you, Jarrett.
Speaker Change: Our next question comes from Russell Gunther from Stevens. Please go ahead with your question.
Hey, good morning guys.
Good morning, welcome.
Speaker Change: 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.
Speaker Change: 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 seeing that transpire over the course of the year?
Yeah, so...
Speaker Change: as we look into 2025 we see you know some continued good things and some continued momentum 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.
Speaker Change: you know so far that feels good and it's never easy but so far it feels feels pretty good and and that's what we're going to continue to target
Understood. Okay, great.
Speaker Change: Switching gears a bit, you know, you guys are in a very comfortable excess capital excess reserve position
Speaker Change: He touched on the pickup in organic growth as well as
Speaker Change: 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, uh...
Speaker Change: You notice 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...
Speaker Change: talked about is 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.
Speaker Change: and and or on share buybacks if if they don't materialize as quickly but at this point we're certainly focused on organic opportunities and then M&A secondly.
Speaker Change: 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?
Speaker Change: Yeah, first of all, you know, we've got four straight quarters, a positive mortgage contribution. So 2024 wasn't exactly an easy year in the mortgage business.
Speaker Change: Operate more efficiently in 2025 than we did in 24 and we operated more efficiently in 24 than we did in 23
Speaker Change: All right, very good. Guys, that's it for me. Thanks for taking my question.
Thanks, Bruce.
Conference Operator: And our next question comes from Catherine Mueller from KVW. Please go ahead with your question.
Thanks, good morning.
Catherine Mueller: I 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 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 –
Catherine Mueller: 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 those average costs are and how you're kind of thinking about deposit cost over the course of 25. Thanks.
[inaudible]
Speaker Change: Yeah, good morning Catherine. As you kind of alluded to, it's still competitive, right?
Speaker Change: 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'd have thought that would have happened earlier
Excuse me.
Speaker Change: So that's still still pretty aggressive. We're still in we're saying
Speaker Change: CDs kind of in some of our markets still above four and a half percent and and we're not putting on CDs at that rate but we're seeing that competitively in in the kind of middle Tennessee area it's it's not quite as bad here as we're seeing in some more of our community markets but yeah
Speaker Change: You're going to have to be in that 80-90% of Fed funds to get new deposits.
Speaker Change: and so that's where we expected to come on. 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 in deposits and we've got to work both sides of the balance sheet.
Speaker Change: Great. But then, on the flip side, with loan pricing, would you say that you still are seeing an expansion?
Speaker Change: in your net new margin, just given what you're seeing on pricing and expectations for growth to be better. Yeah. Yeah, it's...
Speaker Change: 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.
Speaker Change: Loans also are competitive, you know, as things have slowed a tad bit and, you know, for, I guess, modestly slowed, and it makes loan growth and loan pricing a little bit more aggressive as well.
Speaker Change: That's why I mentioned we have to work both sides of each relationship to 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...
Speaker Change: 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
Speaker Change: 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?
Speaker Change: Yeah, I think we should see, you know, expansion of a basis point or two at a quarter, right? If you're just naturally repricing the balance sheet. And so it's not going to be gangbusters, but we'll be modestly higher over time.
Speaker Change: 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 2025, are you seeing more opportunities in C&I versus commercial real estate? If you could just kind of help us
Speaker Change: 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.
Speaker Change: Yeah good morning, this is Travis. We're seeing growth opportunities in both honestly. We have concentrated more on the C&I space over the last 12 months and going forward
Speaker Change: 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 game busters.
Great, thanks so much.
Speaker Change: that we just don't pursue. So I say, 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...
Speaker Change: 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.
[inaudible]
Thank you. Great quarter and great year.
Conference Operator: Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2.
Speaker Change: Our next question comes from Steve Moss from Raymond James. Please go ahead with your question.
Good morning, guys.
Speaker Change: 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 out, 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?
Speaker Change: The specific reserve for the charge off was prior quarters. Yeah, back in the second quarter. Most of that was established in the second quarter.
Speaker Change: Okay, so then the privilege this quarter is a mix of growth and other credit-specific reserves, maybe?
Speaker Change: No, it was loan growth, yes, and then marginally worse economic forecast. We used generally Moody's Baseline and got modestly worse, which was...
Speaker Change: the reason for that there wasn't any other specific credits that driven our
Speaker Change: And there was a little bit of cleanup on that on that charge-off as well. It was not a material amount, but there was a little bit of cleanup on that charge-off, whereas it was slightly over that specific reserve, but that was a lesser piece of that provision.
Okay, great.
Speaker Change: 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, Steve said. Again, you know...
well-positioned, slightly asset-sensitive, yet today, and it's
Yeah, I'm trying to...
Speaker Change: Especially here recently every 24-48 hours, you know, we think there probably will be a couple rate cuts this year But we got them kind of back half the year as we see how things develop Wouldn't be surprised if there's zero So yeah, we got out we got to be able to operate no matter what the Fed does and we expect to do so
Speaker Change: So we would feel pretty good if it stayed where it was, but if we got surprised and rates really went down in a mature way...
Speaker Change: We have a lever with the mortgage capability that would probably get ramped up significantly.
So that's part of the position.
Speaker Change: Great. Well, I really appreciate all of you here today, and have a nice quarter, guys.
Thank you, Sniddy.
Conference Operator: 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.
Speaker Change: 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.
Conference Operator: 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.