FBK - NYSE

Good morning, everyone, and welcome to the FB Financial Corporation's Fourth Quarter 2024 Earnings Conference Call. Hosting the call today from FB Financial are Chris Holmes, President and Chief Executive Officer; and Michael Mettee, Chief Financial Officer. Also joining the call for the question-and-answer session is Travis Edmondson, Chief Banking Officer. Please note FB Financial's earnings release, supplemental financial information and this morning's presentation are available on the Investor Relations page of the company's website at www.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 this call. At this time, all participants have been placed in a listen-only mode. The call will be open for questions after the presentation. During this presentation, FB Financial may make comments which constitute forward-looking statements under the Federal Securities Laws. Forward-looking statements are based on management's current expectations and assumptions and are subject to risks, uncertainties and other factors that may cause actual results and performance or achievements of FB Financial to differ materially from any results expressed or implied by such forward-looking statements. Many of such factors are beyond FB Financial's ability to control or predict, and listeners are cautioned not to put undue reliance on such forward-looking statements. A more detailed description of these and other risks that may cause actual results to materially differ from expectations is contained in FB Financial's periodic and current reports filed with the SEC, including FB Financial's most recent Form 10-K. Except as required by law, FB Financial disclaims any obligation to update or revise any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise. In addition, these remarks may include certain non-GAAP financial measures as defined by SEC Regulation G. A presentation of the most directly comparable GAAP financial measures and a reconciliation of the non-GAAP measures to comparable GAAP measures is available in FB Financial's earnings release, supplemental financial information and this morning's presentation, which are available on the Investor Relations page of 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 $0.81 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. 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%. Full-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 or approximately 4.4%, funded through the growth of our core deposit balances of $343.5 million or about 3.3%. The themes I've emphasized over the past several quarters have circled around the strength of our operating foundation, including our solid capital and liquidity positions, while maintaining our earnings momentum. And this quarter's results reflect a continuation of those efforts. This quarter's earnings resulted in a GAAP return on average assets of 1.14% and a return on average tangible common equity of 11.5%. Our capital position remains very strong as we reported tangible common equity to tangible assets of 10.2% and a preliminary CET1 ratio of 12.8% in a primary -- I'm sorry, preliminary total risk based capital ratio of 15.2%. Our fourth quarter and full-year 2024 results reflect the unique strengths of the company, which continue to distinguish us among our peer group. First, among those, we have intensely built our company with a local market authority model, which allows us to bring a personalized community banking approach to our customers, while still having the size and resources to provide product and technology depth and breadth and top-of-the-line services. While this model is not new in theory, it is unique to banks our size and larger. And as a result, we've experienced growth in our customer-base and we've seen continued interest from high-performing bankers in our region who seek to join our franchise. Second, we operate in a highly desirable geography. As the Southeastern United States continues to experience growth, our geography presents an advantaged opportunity for organic growth in 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 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 remain focused on growing organically through both our retail and commercial businesses and in metro and community markets that we serve today and we expanded on that this quarter with the addition of nine new revenue-producing bankers. That's for a total of 32 for the year. We're also continuing to pursue new markets as we aim to take our banking model into markets that are contiguous with our footprint. Last quarter, we announced our expansion into Tuscaloosa, Alabama, and we're pleased to announce this quarter that we are expanding into Nashville, 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 Nashville 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 brought on strong leadership, begun hiring production teams with local routes in those communities and will soon be establishing a physical presence in both of those new markets. You can expect us to continue doubling down on our value proposition by additional investment in both existing and expansion markets. Our second priority for capital 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 and that they operate in community -- they operate a community focused organization, serve both retail and commercial customers, have meaningful market-share and fit well with our existing branch footprint. Lastly, before I pass it over to Michael, I'd love to congratulate our team on another strong quarter and a successful year. When we assess our performance against the ambitious goals that we set for ourselves for 2024, you all have been rockstars 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-reoccurring 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 4 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 an increased yield of 19 basis points. 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. 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. Brokered 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. In 2025, we'll continue to focus on growing both sides of the balance sheet, as Chris mentioned, and we expect our net interest margin to land between 3.54% and 3.61% in the first quarter. Moving to adjusted 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 maintained 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% compared to 58.4% 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% compared to 54.1% in the prior quarter. The decrease was primarily attributable to adjustments in our short-term incentive expense as we rightsized our accrual to close the year and a onetime franchise tax benefit recognized in the fourth quarter. In 2025, we're expecting to grow banking expenses at about 4% to 5% as we continue to grow the business and execute on our near and long-term vision. Specific to the first-quarter of 2025, we anticipate banking non-interest expense to land in the range of $64 million to $66 million. 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 a specific reserve. It's a credit in the services industry that underwent a series of challenges specific to licensing and employee fraud, which ultimately led to bankruptcy. These circumstances were specific to the borrower and not an indication of anything deeper 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 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 3 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 build of $7 million, primarily due to new allowance on loan growth and updates on 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 CET1 ratio of 12.8%. As Chris mentioned, our team remains focused on the deployment of that capital to deliver consistent long-term growth and earnings in tangible book value. With that, I'll now turn the call back over to Chris.

All right. Thanks, Michael, for the color. To conclude, we're pleased with our quarterly and full-year results, and we're proud of the progress that we've made as a company over the past year. We believe we're poised for a strong year in 2025 and look-forward to sharing that progress 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. [Operator Instructions] And our first question today comes from Stephen 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'd 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 as you continue to bring in new people?

Yes. 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 a sort of an elite titling group in our organization. So I say it's pretty much core C&I frontline bankers -- what else is in there besides that, either Travis or Mike?

No, I think that's the majority of it. And also it's pretty diverse geographically as well. It's not where we've had in this quarter a lift out of nine in one location. It's just pretty diverse of geographies.

Yes, that's right. And as we think -- as we think about 2025, Stephen, we all set a target that we're going to go out and hire 42 revenue producers. It's more about opportunities, finding the right fit. These things take years to recruit the right people to fit what we do. And so, they kind of come to you as they come to you. And that's what happened in the mortgage area and then -- and some of the people we've added in the East, we've been recruiting for a while. And then we added a couple in Nashville as well as we build-out that team.

And I would say this about -- as we look forward into 2025 and beyond, 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 [indiscernible] is because we are getting a lot of inbound opportunities and we expect that to continue and perhaps maybe even gain more momentum as there's disruption in the market. And so, I would tell you that we're pretty optimistic based on just conversations that we're having around our geography.

Yes, that makes a lot of sense. And is that optimism around hiring, what seems to give you more optimism around growth coming up into this year? Are there other signs that you're seeing that leads to 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?

Yes. So as we look forward and fourth quarter, which is not traditionally the most robust quarter and we had a net loan growth of 5.2%. 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 advantaged geography, which I talked about in the prepared remarks. So it's -- that and it's less -- 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 a something that restricts their calling. We abide very strictly by those when we have those -- when those are in place. And so -- but we do have some folks that have been here for now close to a year and we really expect them to -- those folks to really begin to be the ones that hit the stride. And so that's a portion of the growth, but it's not -- it's not totally dependent on that. We expect our existing roster of relationship managers to be out acquiring accounts as well.

Yes, got it. Okay. Yes, that makes sense. And then maybe just lastly for me -- Oh, sorry. Yes.

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

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 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, if it's a -- might be a B+ deal, not an A+ deal, but I might still go after it in this kind of environment. Does it change your mindset there at all?

Yes, it does. It does shape our view and changes it somewhat from where it was in much the way you alluded to. I think under the previous regulatory leadership that was in place, I mean, you were looking at one deal in eight -- in an 18-month period. And so, I think you had to be quite judicious about what you got into, because the opportunity cost could be great. And I think as long as you don't get yourself over your skis and I think that's an important point. As long as you don't get yourself over your skis and acquisitions, you can certainly do that. 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. And so 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 was regulated there, but we saw it get approved relatively quickly. And hopefully that's a -- 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 in a shorter time, it improves the risk picture.

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

All right. Thanks, Stephen.

And our next question comes from Brett Rabatin from Hovde Group. Please go ahead with your question.

Hey guys, good morning.

Good morning, Brett.

I wanted to start on credit and I'm sure you guys saw locally that Wheellock sold the [LBAC] (ph) 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 office in Nashville, any aged properties and if you guys had any kind of median or average age for the portfolio for you guys and just how you see the commercial real estate market here?

Yes, Brett. Good question. And we did see that and we couldn't miss it. So we did see that. We did have two transactions that took place to -- office transactions where they took place at a loss where they sold the buildings at a loss. Both of them were bought some time ago, I think even pre-COVID maybe. They were bought pre-COVID, one of them is substantial loss. But I think that's -- 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 where Nashville is economically or Middle Tennessee, let's say, because that's the market we're 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 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, corporate relocation pipelines are still solid. The inquiries are still solid with the chamber and 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 property, I think the two that you talked about that’s sols at 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 issues. And so -- and if you notice, they were out of town, they were acquired by a fund from out of town that 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 -- it's sold at auction, but at a very small loss to the entity that financed it. Matter of fact, well under $1 million 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 it -- like all -- 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 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?

Yes. We don't have that right here at our fingertips. 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 was -- what sold here at a discount.

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? And then just as you guys see it for the full-year, assuming the Fed is 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?

Yes. Brett, 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, that could be in the margin. And also, we like stability in the interest-rate environment, right? So we tend to perform better as an institution and kind of more methodical moves in rates. And the team has done a good job as rates have gone down on the deposit side. Keep in mind, half of our loan portfolio is floating. So it happens within 90 days. You get a little bit of a peak down in interest rates on the loan side. And so, as things stabilize, yield curve steepens, we think we'll see some margin expansion.

Okay. Fair enough. I appreciate the color. Congrats guys on a solid 2024.

Thanks, Brett.

Thank you, Brett.

Our next question comes from Russell Gunther from Stephens. Please go ahead with your question.

Hey, good morning, guys.

Good morning, Russell.

I just wanted 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?

Yes. So, as we look into 2025, we see some continued good things and some continued momentum. And we're looking at that low double-digit, high single digit -- high single digit, low double digit type of loan growth rate is what we're -- is what we're targeting. So far that feels good and 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 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 2024 around securities repositionings and the buyback. So how are you thinking about those levers? Or is it kind of capital build mode for M&A?

Yes. You noticed, we didn't necessarily mention that on restructuring and buybacks, but they're always on the table. We like the first two options that Chris 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. And last one for me. I appreciate the commentary on the core expense growth rate within the commercial bank. How are you thinking about expenses within the mortgage vertical and any improved efficiencies there?

Yes. First of all, we've got four straight quarters of positive mortgage contribution. So 2024 wasn't exactly an easy year in the mortgage business. So I'm proud of the kind of the turnaround they had there. And we expect them to continue to improve. We want to be better than the market. With regard to mortgage, we expect to be better operators. And so, we 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 2024 and we operated more efficiently in 2024 than we did in 2023.

All right, very good. Guys, that's it for me. Thanks for taking my questions.

Thanks, Russell.

And our next question comes from Catherine Mealor from KBW. Please go ahead with your question.

Thanks. Good morning.

Good morning, Catherine.

Just one 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 in the industry -- 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 2025, 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 costs over the course of 2025? Thanks.

Yes, good morning, Catherine. As you kind of alluded to, it's still competitive, right? 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 still in -- 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 of -- more of our community markets, but you're going to have to be in that 80%, 90% of Fed funds to get new deposits. And so that's where we expect it to come on. We know that they're not going to come on much cheaper than that. So it will be a competitive year when you're trying to grow relationships and deposits and we got to work both sides of the balance sheet.

Great. But then on the flip side with loan pricing, would you say that you still are seeing 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. Yes, 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 it -- loan is also competitive. It's -- as things have slowed a tad bit for, I guess, modestly slowed, it makes loan growth and loan pricing a little bit more aggressive as well. So yes, 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 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 rates, 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 expansion of a basis-point or two a quarter, right? If you just naturally repricing the balance sheet. And so it's not going to be gangbusters, but we'll 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 2025, are you seeing more opportunities in C&I versus commercial real-estate or if you could just kind of help us talk about where you're seeing more pipeline opportunities today? I think the tenure 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.

Yes, 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, 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 there. We will see some marginal growth in the CRE portfolio. But we're getting a lot of good opportunities. We're really taking care of our existing relationships in those areas, but the net-new relationships are primarily coming from the CRE space.

Great. Thanks so much.

Catherine, 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 -- that we just don't pursue. So I'm sorry, we see a lot of CRE opportunities. I mean relationship that we just don't pursue because we are trying to maintain 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 -- we're trying to make sure we strike the right balance.

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

[Operator Instructions] Our next question comes from Steve Moss from Raymond James. Please go ahead with your question.

Good morning, guys.

Good morning, Steve.

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 charge-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.

Yes. Second quarter -- most of that was established in the second quarter.

Okay. So then the provision for this quarter was a mix of growth in other credit specific reserves maybe?

No, it was loan growth, yes. And then marginally worse economic forecast. We generally Moody’s baseline and got modestly worse, which was the reason for that. There wasn't any other specific credits that drove it higher.

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

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

Yes. We're slightly asset sensitive, Steve. So again, sticking in this range or no rate cuts is fine with me. We have a steepening yield curve, which should benefit at least the balance sheet makes a little bit tougher on the mortgage side, but well positioned, slightly asset sensitive. Today it changes, especially here recently every 24, 48 hours, we think there probably will be a couple of 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 there's zero. So yes, we got to be able to operate, no matter what the Fed does and we expect to do so.

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. Keep in mind, we got a -- we have a lever with the mortgage capability that would probably get ramped-up significantly. And so we -- so that's part of the position.

Great. Well, I really appreciate all the color here today and nice quarter guys.

Thank you, Steve.

And ladies and gentlemen, at this time, we were -- we will -- 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, Jamie. And I would just like to say thanks once again to everybody for joining us on the call. We always appreciate your interest. We appreciate your participation and we will look forward to joining again next quarter. Thank you.