Joseph Kauder
Thank you, Jared. We reported fourth-quarter net income of 47 million or $0.28 per share, which reflects net interest margin expansion and a reduction in our noninterest expenses. Core profitability was strong across the board this quarter as we continued to benefit from the impact of balance sheet repositioning cost saving initiatives and growth in core business drivers.
I know everybody has already, or will be able to, soon review our earnings materials. So I'd like to simply highlight some of our key drivers from a financial point of view, along with some information that may help you better understand our positive outlook.
We generate 235 million in net interest income which is up 1% from the prior quarter. This was driven by expansion in our net interest margin, partially offset by lower average interest earning assets. Interest expense declined 25.5 million or 12% quarter over quarter due to a reduction in funding cost. This was partially offset by an interest income decline of 22.4 million, largely driven by the impact of rate cuts on cash balances, employee rate loans and securities, and lower average cash balances in the quarter.
Our net interest margin this quarter increased 11 basis points to 3.04%, due to a 27-basis-point decline in our cost of funds partially offset by a 15-basis-point decrease in the yield on average earning assets. The decrease in the cost of funds reflected the full-quarter impact of prior balance sheet repositioning actions as well as a lower rate environment.
Cost of deposits declined 28 basis points from 2.54% to 2.26% as we achieved a 54% beta on interest bearing deposits following the most recent cut. We also benefit from average NIB as a percentage of total deposits growing to 29.1% from 27.7% in the prior quarter.
Regarding the yield on average-earning assets, we saw 17-basis-point decline in our average loan yields partially offset by a five-basis-point increase in our average yield on securities resulting from the securities portfolio repositioning completed in the third quarter. Rates on new loan production came in at 7.02% for the quarter, with commercial new production loan rates of 7.6% offset by lower yields on new real estate production.
In terms of interest rate sensitivity, our balance sheet mix has shifted with growth and interest rate sensitive assets particularly warehouse loans which are floating rate, and we are close to a neutral interest rate risk position. Although we have 6.2 billion more, and liabilities repricing or maturing than assets over the next year, the higher interest sensitive asset betas offset much of the impact of this asset liability gap.
We expect continued expansion in our net interest margin as we reduce our cost of funds while our 2025 outlook for our net interest margin for the entire year is currently targeting a range of 3.20% to 3.30% that assumes no further FED rate cuts in 2025.
Our NIM is largely an output as we prioritize long-term profitability over any specific NIM target, and we adjust this target as appropriate to optimize our earnings. Our total noninterest income of 29 million in the fourth quarter includes a negative, I'm sorry, our total noninterest income of 29 million in the fourth quarter includes a negative mark-to-market adjustment and lower dividend income in our CRA equity investments relative to the prior quarter.
Noninterest income can be, somewhat, volatile but we expect it to average 10 million to 12 million per month, while we had lower noninterest expense of 181.4 million with a significant decrease from the prior quarter. This number is seasonally low, and it is expected to normalize in Q1. And for 2025, compensation expenses are generally, seasonally, lower in the fourth quarter, and seasonally higher in the first quarter due to resets of accruals for payroll and benefits.
In 2025, we expect quarterly noninterest expenses to average 190 million to 195 million as we balance continued focus on managing cost with the investments to grow our business. Our effective tax rate was lower in the fourth quarter due to tax benefits resulting largely from a state tax adjustment recorded in the fourth quarter to increase our deferred tax assets resulting from the filing of our 2024 state tax returns for 2025. We expect our normal tax rate to be in the range of 27% to 28%.
Turning to our balance sheet, as Jared mentioned, we have broad-based loan growth across the core portfolio. We are targeting loan growth in the mid- to upper-single-digit range in 2025, assuming a relatively stable economic environment, root growth coming across all of our core areas.
Our total deposits of 27.2 billion increased 364 million in the fourth quarter. Average NIB deposits grew 1.4% from the prior quarter. While end of period, noninterest bearing deposits declined slightly due to the yearend outflows that we mentioned earlier on this call.
Looking ahead into 2025, we are targeting deposit growth in the mid- to upper-single digits. Noninterest bearing deposit growth remains important to our growth strategy, and we are targeting NIB at over 30% of our total deposit base for 2025.
At this time, I will turn the call back over to Jared.
Jared Wolff
Thanks, Joe. With a successful year of merger integration and balance sheet repositioning actions behind us, we are primed for profitable growth going forward given the strength of our balance sheet with high levels of capital liquidity as well as our attractive position in key markets. Our company is very well-positioned.
We're starting to see a higher level of loan demand, which we saw pick up at the end of the fourth quarter. We are optimistic that loan demand will continue to improve in 2025, but we still expect more of the growth to come in the back half of the year as the market is anticipating the economy will expand.
We will capitalize on these opportunities to grow with the economy to grow with the economy while still maintaining our disciplined and conservative underwriting and pricing criteria. We see good opportunities to grow across all loan areas given the talented teams we have in our markets and our deposit gathering efforts which remain a primary focus of the bank, continue to produce good results and we expect to fund our loan growth with low cost deposits added from new clients, as well as current high levels of liquidity.
We also expect to see expansion in our margin as we continue to reduce our cost of deposits and loans that are maturing or resetting as loans that are maturing or resetting are doing so at higher rates.
The first quarter is typically slow and flat with Q4. As Joe mentioned, this is partly due to a reset of accruals taxes and other expenses. While pipelines are building, we typically see some seasonal weakness in overall deposit flows and loan demand in the first quarter each year. But we feel very confident in our ability to deliver strong results ahead.
We remain optimistic about the opportunities that lie ahead in 2025 to grow our business and drive higher returns. We believe we are well-positioned to generate strong financial performance in '25 and create additional value for our shareholders.
Let me say a few more words about the wildfires and the impact on Los Angeles County. As you have heard, the fires have been truly devastating and among the most expensive in California history is going to take billions of dollars with current estimates exceeding 100 billion to remedy and rebuild the affected areas. That said, the fires burned a little over 1.5% of the acreage of LA County.
And by and large, most of the areas of the city were not affected at all. And the areas that were affected were largely residential. LA already had a housing shortage, and, as you have no doubt, read, the impact of the fires is compounding that issue further. We are watching very carefully, what I call the spillover effect of the fires, the economic effect that trickles down to other areas of the city because the small businesses that were supporting the affected communities are now impacted too, and they can't bring home revenues to their communities.
The banking industry can and should play a critical role in helping to support stabilize and revitalize impacted communities. And we are expected to do so here, as well through targeted lending, payment, relief, and other tailored programs that is all in the initial phases. And we are committed to supporting it and playing an important role without, in any way, removing focus from the real tragedy that has occurred, and it's still ongoing, with the fires.
There is a silver lining to all of this as well. That is likely to be some means, some very positive things for our city, county, and region in the years ahead.
First, the city and state have enacted executive orders which are focused on streamlining development and clearing hurdles to ensure we can quickly get back and get to the rebuilding phase. Second, the mayor is appointed an experienced czar to be a point person for much of this, and we have numerous business leaders joining together to envision LA 2.0. Third, if we look at what happened in Houston following hurricane Harvey in 2017 or New Orleans following Katrina in 2005, there was an initial period of economic disruption followed by a multiyear economic boom, spurred by development.
Given the size of the LA economy and the fact most of it was spared, I'm very optimistic about the prospects of this region, and believe that we too will organize and build back better, in a way, that could spur very substantial growth for such an important part of our nation's economy.
As the largest independent bank headquartered in Los Angeles, we employees to play a leadership role and to help our clients and communities. I'm incredibly proud of everything that our talented team has accomplished during the course of '24 and how our company has performed. We always say that banking is a team sport, and that is true. Now, more than ever, our team banded together and worked tirelessly during the recent wildfires to support each other, our clients, and our local communities. I'm privileged to lead this team and look forward to what we can accomplish together in '25.
And I hope that I have been very clear about how much opportunity for growth we see ahead with that. Let's go ahead and open up the lines for questions.
Operator
(Operator Instructions) Timur Braziler, Wells Fargo.
Timur Braziler
Hi, good morning, Jared. Maybe starting on expenses, can you, maybe, help us just bridge the gap between the current rate? You know, it's been a couple of quarters of being able to work those down pretty well. Just current rate versus guidance and maybe the timing there is all expected to bounce back in the first quarter. Or do you expect to grow into that guided range?
Jared Wolff
Yeah, let me start and then I'm going to turn it over to Joe for the details and the timing.
If we achieve the low end of our range, the low end of expenses for '25, that would represent 3% savings relative to a normalized '24. If we achieve the height of a range, that's 6% again. So even though there is some increase of expenses relative to the low point of Q4, we're still expected to continue saving 325. That being said, we really need to grow this company and we expect to grow this company, and the expenses will not grow if growth doesn't come along with it. We're looking to expand our margin and expand our earnings, and we think that these estimates are maybe conservative but probably reasonable in light of the growth that we expect. Joe, why don't you add detail there?
Joseph Kauder
Yeah. So we would, as we mentioned earlier, team are the first quarter is seasonally high usually for things like comp expense versus the fourth quarter. And that's, as payroll taxes reset certain benefits like, for example 401K, matches all these other things are reset. You also have that's usually the quarter that some of the inflation kicks in for wage inflation and stuff. And so, I think, we will see it go up and then as the year progresses, it will, hopefully, trend down.
But I want to reinforce what Jared said. We have a real focus on cost and it's something that we certainly think about every day, and we'll continue to work. We have lots of initiatives going on. But we also want to grow our balance sheet, and we want to grow earnings. And so we believe that if you look at what our forward guidance on loan growth and NIM expansion, that we think that will continue to, with this expanse base, we will continue to grow operating leverage. And it's all positioned to have a good 2025.
Jared Wolff
II guess I would add there that, for us, this is optimistic. In that we see we need expenses to support growth. And, if we were kind of trending down and going down, it might suggest that we were intending to be a little bit flatter. But, and as we've guided previously, we thought we would be low-single digits in terms of loans.
Now, we're guiding to mid- to upper-single digits, and we're just seeing some good shoots in the ground right now and feel good about '25 where we sit today, obviously, all economic dependent. We don't think there's going to be any rate cuts in '25, and if there are, that's great.
Timur Braziler
Okay, thanks. And then, maybe, just sticking on the loan growth expectation and just looking at four Q, production was up quarter on quarter. Line usage was up, but also pay off and pay down activity was a little bit elevated. I guess as you look towards that higher, mid-, mid-to-high-single digit guide for '25, is that payoff stabilizing? Is that expected line usage loan production, kind of, what are the dynamics within that '25 guide that you expect to get growth from?
Jared Wolff
Yeah, I think that if you're starting to see a lot more activity, I think that paydowns and payoffs have to be up there as well because that's just normal. It's just the part of the overall cycle. Other banks are experiencing paydowns and payoffs, and we're taking out lines in other banks and putting them here and some of our clients, we might not want to renew them. We're going to try to minimize the payoffs and the paydowns that we think we can hold on to.
But there's a lot more money circulating in the economy when that happens. So we think about it in terms of what's the net growth number that we want to target. And we're going to make, obviously, net grow. You want to keep your base stable and grow on top of it. So we're going to try to minimize the paydowns and payoffs and, if they happen, we're going to have to grow on top of it.
So we think about it in terms of net growth, we're prepared for it. But that's part of the normal cycle and in some ways, it's really good when that happens because there's a lot more money circulating in the economy. We saw if you look at our table on page 16, I mean, you can really see the pickup in activity relative to where it was. And so that's I think a good sign.
Timur Braziler
Great. And then just last for me on the deposit side. Just maybe talk to the broader competitive landscape, what you're seeing in terms of some higher costs run-off in the coming quarter and then one for Joe. Just the deposit spot rate at the end of the year.
Jared Wolff
Yeah, we see we see less competition deposit pricing. We're starting to see less demand for higher rates. So that's going to allow us as we get a little bit further from the rate cuts. We're going to take another bite at the apple and start moving deposit costs down again. We've been doing it effectively. Our teams have done a great job with it. We do have deposits that are coming off, still in the 5s that we have the opportunity to reprice down, and that's going to continue to be a tailwind for us.
Joseph Kauder
Yeah.
Jared Wolff
And then, Joe, did you want to provide a spot rate? Do we provide a spot rate at the end of the year?
Joseph Kauder
We haven't provided a specific spot rate, but I think you can assume it's just right around, maybe, slightly below the cost that we provided to you for four Q, which was cost deposit of 2.26% just probably a little bit below that.
But I do want to, I do want to say, when you look at the 2025, we still have a fair amount of, higher cost deposits like brokered CDs and other things that we put on at the beginning of this year as we were going through all of our restructuring.
And those things are going to roll over and as they roll over, we're looking at picking up, even if, whether they roll over and we are able to replace them with core deposits or even if we have to replace them with brokered again, it's a meaningfully lower rates that we're rolling those things over at. And so, we feel good about our ability to continue to bring down the cost of deposits.
Jared Wolff
Great. Thank you.
Operator
Chris McGratty, KBW.
Chris McGratty
Jared, you said two quarters in a row of sequential but modest growth and net interest income. Taking the seasonal factors of Q1 out, is that the cadence as we go through the year that you grow off of this mid two third base?
Jared Wolff
I think. So, I think with loan growth, and I was on the credit committee this morning. and we had a $10 million loan that for a great customer of ours, it's coming off in the mid-fours, and we're repricing it in the mid-60s. And so we're seeing a fair amount of that.
And so it just feels like we should keep expanding there. Our margin is going to expand, we're going to keep, I'd like to do more than what we, what we guided to, but I just don't know, the margin is largely an output for us. We know it when we get there and we have loan committee, we price loans,
I think fairly conservatively, it seems to be like we're getting good momentum. Our loan yield for new production was just above seven on average, but it can be a little bit higher than that. We had some lower rated, residential and CRE loans that brought the average down that came on the course. So overall, Chris, I think the answer is yes for those reasons.
Joseph Kauder
Yeah. And, Chris, I just lay in the same factors I talked about for the cost of deposits, how we think is still going down. So that same trend on the loan side is so the loans that roll off are rolling off at lower rates, and loans are rolling on and rolling on significantly higher rates so that we expect that trend to continue in 2025 as well.
Chris McGratty
Okay. And just to put a bit of a finer point on the net interest income, Jared, the cash and liquidity, the securities and cash, if you're targeting mid-to-high-single-digit loan growth, presumably some of that will get funded. So earning asset growth might be positive, but less than the guide that you've given for loans. Is that right, Joe, what do you think?
Joseph Kauder
I think it's pretty consistent. I think, one thing you might see for us in 2025 is, we're working hard on our, looking at some of our liquidity numbers and we might bring our cash numbers down slightly in 2025, which will help us fund that growth, and grow non-earning assets, earning.
Jared Wolff
So I was going to, you're asking if our cash balances come down. We're going to reduce the earnings on the cash because we're going to get a higher return on yield. So I think that's probably true, but it's net is going to be higher.
Chris McGratty
Okay. Got it. And then if we do get a cut, I see on slide 6, you gave the ECR cost of 27 million to 29 million. What's the sensitivity to that number if you get a cut?
Jared Wolff
Well, I'm trying to figure out how to answer this with the information that we provided because I don't want to give out more than we have. A certain portion of our HOA balances are tied to FED funds and there is 100% beta with FED funds. So it might be that our formula is we're paying them 75% of FED funds. But when FED funds go down, that whole thing goes down by as much as however much that fund goes down. So I don't know that we've disclosed the dollar amount that is tied to that ECR but that's how it works.
Chris McGratty
But directionally, if we get a cut, that number shouldn't be higher, it could be lower.
Jared Wolff
No, it's going to be lower and it's going to help, and you can probably figure it out by looking at what happened quarter over quarter. We don't have a full quarter of it yet, but we said how much of it was from UCR. And so you can figure out how much it changed quarter over quarter.
Our HOA business is really great. Alan and his team do a great job. And it's something that we are looking to grow. As I mentioned, we had some customers that were more expensive, and we try to reduce the impact of those customers by shrinking those relationship balances and growing other balances that were with other customers and so and bringing in new relationships and we're very focused on doing that.
Chris, on page 12, it says ECR-related expenses of 27.5 million were down 8% quarter over quarter, and we're down 8%, and that was without a full-quarter of rate cuts. So can see that there.
Operator
Matthew Clark, Piper Sandler.
Matthew Clark
Hey, good morning, everyone. Thanks for the questions. Can you give us the average margin the month of December?
Jared Wolff
We haven't been providing monthly margins.
Joseph Kauder
You know, I was going to say we stopped providing that just because there can be noise in that, and we didn't necessarily find it helpful. I'll just say that it's pretty much where, it's close to where we ended for the quarter.
Matthew Clark
Okay. And then just on the comp line, the 77.7 million, obviously, going to bounce back here. But can you give us a sense for how much reversal of comps might have impacted that number? I'm just trying to get a sense for where that run rate of comp might go here in the first quarter.
Joseph Kauder
You know, I don't think we put out that level of specificity. I'll just say that we're going, it will go up a bit, maybe 10% or so. It might be good, somewhere in that range. It's driven by all the things we talked about on the call.
Matthew Clark
Well, Joe, let me ask you, this is our comp expense. Is the ratio of comp in our noninterest expense about the same. So if no expense is all going up, is it all going up proportionally, or some lines going up more than others.
Joseph Kauder
Some lines more than others, it's mostly comp, and maybe one or two other things, but small things. But it's largely a comp increase.
Jared Wolff
So, of that increase, Matthew, I think a disproportionate amount is going to be comp.
Matthew Clark
Yeah, I'm just getting a sense that maybe that run rate is below the 190 in the upcoming quarter. But we can deal with that. And then on the ECR deposits, can you give us the average ECR deposits in the quarter? I think they were 3.7 billion last quarter.
Joseph Kauder
Yeah, I think that was end of period though, I was trying to get a sense for the average.
Matthew Clark
Okay, I can move on? And then just on your CET1, continues to grind higher. Any updated thoughts on the buyback this year?
Jared Wolff
Look, we're continuing to look at it. We're really pleased with the fact that our capital keeps growing, and we're going to make sure that we are actively considering all possibilities to use our capital. We have a couple of things in mind that we'd like to use it for and we're going through some analysis now.
Matthew Clark
Okay. And then just back on the ECR costs, assuming those ECR balances were flat, it would imply a 50% beta in the quarter. I mean, is that how we should think about ECR costs with our assumption around FED funds?
Joseph Kauder
Well, for the deposits that are impacted, it has been 100% beta. But you also got to look at the timing of the cut, and everything, to figure out what the impact is. But for those deposits that have ECR, they are largely, as I said, 100 now going forward. We've been, you know that we believe that trend to be largely be -- to continue.
Matthew Clark
Okay, great. If you can dig up that average ECR deposit balance, that'd be great. Thank you.
Jared Wolff
No problem. Thanks, Matthew.
Operator
Gary Tenner, D.A. Davidson.
Gary Tenner
Thanks. Good morning. I guess another expense question. I just want to make sure, Joe, that I heard an initial answer you gave correctly in terms of that 190, 195 range. I think you suggested earlier that it would be maybe towards the upper end, and then come down over the course of the year. I just want to make sure I heard that correctly in terms of setting first quarter expectations, obviously, given some of the seasonality, but just want to make sure I heard your comment correctly.
Joseph Kauder
So I didn't mean to give any more refinement other than to give the range that we had the 195 to 190. I think you can assume that comp expense in and of itself, comp expense is seasonal, and comp expense tends to peak in the first quarter on with respect to certain metrics. Now, there's other things that might impact it going forward, but that's what I, that's what I meant to say.
Gary Tenner
Okay, I appreciate that. And can you just remind us, in terms of seasonality within the HOA business, is it what's the kind of low point.
Jared Wolff
Typically, in the year? It's actually -- go ahead, Joe.
Joseph Kauder
I believe it's towards the end of the year. It's usually when it flows out and it tends to flow back in.
Jared Wolff
That's right. We see outflows at the end of the year, and then it starts flowing back into the other thing you see is you see it build up at the beginning of the month. And then you see it flow out at the end of the month because people make their payments at the beginning of the month. And then it gets distributed out from our bank throughout the month and builds down and then it builds back up at the beginning of the month and then it goes out through the month.
But I would say, if there is a low point to it, it's towards the end of the year and, Gary, let me go back to a question that Matthew asked about the average ECR deposits. It's about 3.7 billion. Most of our HOA deposits have an ECR tied to them. The formulas are all different, but the average is about 3.7 billion.
Joseph Kauder
I got to refine the number 3.65%. So right on top of 3.65% for the quarter.
Gary Tenner
All the sequel lower rates bring that cost down. But I think you've implied in the past that's still a business you would like to actively grow, correct?
Jared Wolff
We are trying to actively grow it. Absolutely.
Gary Tenner
Okay. So dollar terms may trend a little bit differently. Okay. And then last question if I could. Jared, you had been pretty positive on the pull through in terms of rate cuts on the deposit side, at least through the first 75 basis points of cuts. Could you give any indication if that's held with the December cut? And what you've seen around that?
Jared Wolff
Yeah, we've achieved approximately 54% beta. You have to measure it over time and see what happens and make sure that you have the stability. But you know, we had a really good quarter. Our cost of deposits, our team is managing them exactly the way they should. We're showing deposit growth as we're bringing cost down. We're bringing in the right types of relationships.
We're in a market that's absolutely poised to grow. We had solid loan growth from certain segments of our company without it being broad based loan growth across the entire company and it was meaningful. And so the opportunity to grow loans across our entire company in all of our segments is what we see ahead, which is pretty exciting. You know, the real estate markets, were completely locked up in California, and now they're starting to open back up again.
And so we're starting to see some activity in mini perms and other things that will provide a lot of opportunity and a lot, real estate transactions employ a lot of people. Every transaction has a broker, as an appraiser, as an adjuster. I mean, it's just a lawyer, there's a lot of people involved in escrow title, tons of people involved in real estate transactions. And so it really drives the economy when that starts picking up. And as everybody knows, this economy is really in southern California, there's a lot tied to real estate. So I'm excited about what we're seeing here.
Operator
Andrew Terrell, Stephens.
Andrew Terrell
Hey, good morning. Jared, I wanted to go back to a point just a minute ago on capital you made. I think you mentioned you were looking at different options throughout the year. I'm just curious, you've got $2.3 billion of health and maturity security still on the balance sheet. Is one of the options or leverage you're looking at repositioning of HTM book.
Jared Wolff
Yes. You know, I think, there are some very specific dynamics around that that takes, obviously, our intent and capacity to hold to maturity exists and that's our position today. Whether we would change our intent is a factor of a whole bunch of things. But that doesn't mean that you wouldn't do any analysis to look at how that would work. What it would mean, what that would look like, and we have to figure that out.
But it is hanging over us, right? A very low yielding long duration HTM book. There have been a couple of banks that take that bite and reposition their HTM and seen a big uptick in earnings. And so I think, it's incumbent upon us to evaluate that, and figure out what that means, and understand what opportunities are out there. But we have not in any way changed our intent as of now.
Andrew Terrell
Okay, I appreciate the added color there. If I can ask Joe just on the tax rate this quarter. Could you quantify the impact of the DCA benefit that you recognize in the tax line this quarter?
Joseph Kauder
I think it was about $5 million.
Andrew Terrell
Okay. And then I wanted to ask on just the -- I was maybe a little surprised to see the pickup in the not accrual loans this quarter given, I think, you mentioned the charge off this quarter with the loans that had previously migrated. NPL. Just curious if you could speak to, I know it was about $20 million. But could you speak to the step up in the nonaccrual loans this quarter?
Jared Wolff
It was primarily one relationship. The borrower died. We have two properties that are, one is multifamily, and one is a medical office, that are occupied full cash flowing, but we're dealing with the trust. It's a family, the guy died and now they've got to settle it, and the kids are working it out and it just, it's being, a little bit been disruptive for the family. And so, those two loans are $30million, $34 million.
So that's a huge part of the increase in nonres. As we said, it's a big part of it, if not most of it. So that's the story there. We're going to get paid back, but it's going to be disruptive until we can work through it with the estate and the trustee.
Andrew Terrell
Got it. Okay. I appreciate it. And actually, if I could ask just one more for the charge-offs you took this quarter. Could you buy? How much was the Life Sciences versus Civic?
Jared Wolff
14 million was Life Sciences, the rest, fundamentally, rough numbers.
Andrew Terrell
Is it larger than most of the typical? I thought most of the Life Sciences loans were generally smaller than that. Is that on the larger end of the Life Sciences spectrum?
Jared Wolff
I'd say it is. And the other thing I would say is that this portfolio has performed exceedingly well. We're very committed to it. We like it. I spent a lot of time with it. It's going to happen. I mean, it's just look, we have 4 billion of deposits and 1.5 billion of loans in our venture book and rough numbers, and it's going to happen.
This hasn't happened since, I don't know, 2018 or '19. But again, we were very aggressive. We could have probably, taking another stance. It's not a zero. We have an opportunity to get some money back later. And I just said, let's do it.
I've been very clear with everybody that I didn't want there to be any headwinds in '25 that we had the ability to control in '24. We are really focused on clearing the decks for '25 and making sure that it is a really great year for us and for our teams. And so this was something I think was fairly aggressive that we thought was the right thing to do.
It's on the larger side. And fortunately, we had the capacity to do it. Our provision in the quarter was $13 million, which was larger than we've been able to do in prior quarters and we still earn $0.28. So those things all factored in.
It's not saying we wouldn't have charged it off if it meant we were going to earn less money. I would have because I wanted to make sure that we could again clear that extra 25 but it's isolated. It happens. I'm proud that we have the ability to do it, and I think our team did a great job, getting to this point and, we'll, we'll move on.
Operator
David Feaster, Raymond James.
David Feaster
Hi, good morning, everybody. Just, I wanted to start on the loan side. You know, it sounds like it's going to be a bit more back half weighted. I think you alluded to that. But have you started to see an improvement or a shift in sentiment thus far? Have you started to see any improvement in the pipeline early in 2025? And just what are you expecting to be the key drivers? It sounds like it's going to be much more diversified than we've seen recently. You've had early success in the venture and warehouse segments. But, just thoughts on the sentiment and demand in the pipeline and then what do you expect to be some of the key drivers?
Jared Wolff
Sure. So we expect warehouse fund finance to continue to perform. We expect lender finance to start picking up as our team has now been here for a little bit and they're starting to show some deals that we really like. We saw another deal this morning from our equipment finance team that look great. So there's a lot of things that are going to continue to move.
I think our general just lending in our community banking space, which is our regions that are across California as well as Colorado and North Carolina. I think that's where we're seeing a lot of pickup, and a good part of that is just you run the mill of real estate and C&I loans, those seem to be coming with more volume at this point and there seems to be a pickup in activity. And so we're excited about that.
My bias is still that we're going to see it more at the back half of the year than the front half of the year, meaning, the volume of loans is going to be higher later just because I don't think people just turn on the spigot and then it all comes at once. And so the momentum will just build, and that's naturally going to occur.
But I'm still optimistic that Q1 and Q2 will be good generally because of other factors. Even if loans grow, I think earnings in Q1 tends to be relatively flat with Q4. And you know, maybe it's a little bit better, maybe it's flat, whatever. It's not a huge delta because of expenses right up in Q1, and then they start tapering down again. But I feel very good about where we are, David.
David Feaster
Yeah. Okay. Do you see a similar dynamic on the deposit front? You know, just from a timing perspective, I mean, your growth targets are really strong. I'm just curious, the timeline of that. Do you expect that to be similarly back half weighted? And where are you seeing the most opportunity? It sounds like there could be some HOA growth and just what's the marginal cost of new core deposit growth on a blended basis?
Jared Wolff
I think it's all moving together. I think the loans and deposit volumes really come together. I think, we're still seeing a lot of inflow from the banks that have left the market where people ended up at some bank that, acquired the bank that left or, and you know, we're getting opportunities there.
It's pretty spread out and we are very focused on noninterest bearing deposits. But we had growth in just our average deposits in the quarter because we'll pay a reasonable rate for deposits, and we want our folks to bring in all sorts of deposits. And so we're not adverse to other types of deposits. They're coming in at lower. It's allowing us to let higher cost brokered and higher cost CDs run off.
And so we're, David, I think it's going in terms of your two questions. I think it's going to flow in concert with loans. I think those things kind of go in together. And second, I think, the cost is it's going to come down from where we are now and we're focused on NIB, but we'll take money market and savings accounts to.
David Feaster
And then just last one for me, I'm just curious, we've talked a lot about the expenses side, and I'm just curious, what are some of the investments that you've got embedded in there? Obviously, there's natural expense growth from raises and normal inflation. But what kind of investments are you focused on right now? People systems processes, or even additional build out of some of the other initiatives that you've got or other business lines like deep stack or the payments. So I'm just curious what are some of the investments and initiatives that you've got embedded in there?
Jared Wolff
Sure, we'll take off a couple of things. First is always people and making sure we have teams and we are hiring business teams in our key markets right now. And very focused on that to support the growth that we know is there. And when you hire business teams and the growth shows up, you have to make sure your gearing ratios are right in the back office and make sure that you have the right support teams in there. So you're not bearing your team.
So we're going to need to do that and make sure that our credit teams are supported and our risk teams are supported and our branch teams are supported and we're going to have to do that if the growth shows up, which we expect it to do so, but we try to balance that. You don't necessarily hire ahead of the growth. You could try to hire in tandem and do it in a smart way.
Second is we are investing in our systems and so we have an Encino project that we've been working on that. That's really good. We have sales force for -- we're about to finish our program that will allow us to open accounts digitally across the bank, which we're excited about. That's been an important investment for us. We have some cloud migration projects for it where we have to move from four remote locations to two co-located facilities and then we want to move it to the cloud.
These things are investments, we have a big data project, we have too many systems in our company. And one of the things that we're trying to do is harmonize the data, which will really inform, give us incredible reporting, will allow us to modernize our financial systems. These things, you have to invest ahead of, you have to invest early and you get the benefits later.
You don't necessarily see the money, see the benefits while you're doing it, but they're huge, very, very important projects for us to be the company that we want to be a couple of years from now. You know, we don't aspire to be where we are today. We aspire to have the systems and visibility and data to be a much more profitable company that might be larger than we are today. And so we have to invest as if we're going to be here for a while. And so those are some of the investments that we have on top of where we are now.
David Feaster
That's a great call. Thank you.
Operator
Jared Shaw, Barclays Capital.
Jared Shaw
Hey, guys, thanks. I guess most of my questions have been asked, but looking at capital, around this time last year, you had called out, sort of, 11% CET1 is as a level that you would look at reconsidering options after you got to it. Do you think you still need to be at 11%? You know, a lot has changed in the industry positively over the last year. Do you feel like an ultimate CET1 level could be lower than where we are in, sort of, the near to midterm?
Jared Wolff
I think. So I think, it really matters all of your metrics and when we sit down with our regulators and look at how the company is performing across the board, how quickly we're building up capital, how much liquidity we have, and what the quality of that liquidity is. And you know, the quality of our loan portfolio and how well reserved we are, all of those things are taken into account when we ask for permission to dividend, dividend up enough money to redeem capital.
And so I don't think that there is a line in the sand, and I think it could be lower than 11. It just, they do look at peers too. They want to make sure you're in line with peers and you're not somehow constantly below them, but you're seeking to do something that your other peers are not. So, we have to look at all those things, but I don't think there's a line in the sand.
Jared Shaw
Yeah, it sounds like from a couple of other companies that reported this quarter, they're waiting for the first mover as well. So maybe once you get that first one and then the peer group all changes quickly, it could happen.
Jared Wolff
And we're probably not the first mover for a whole bunch of reasons. But I think we are very intentional and are very focused on when we build up capital deploying it the right way. If these things are not mutually exclusive, we can invest in our company, we can reduce our share count, we can do a whole bunch of things simultaneously, but we want to do it in a very prudent way.
Joseph Kauder
I just have one other thing, Jared, that like take. For example, the preferred shares that we pay the preferred shares doesn't impact the et one now impacts other ratios that we'd have to consider. But that might be something you want to think about, we want to think about.
Jared Wolff
That's a good point. You know, CT they are preferred is something that we talk about a lot. The issue with the preferred, of course, is that it's not callable. So we have to buy what we can get in the open market or you have to tender for it or it's got to wait till maturity. If you wait till maturity, you can take it out at par ahead of maturity, you probably have to factor in some premium to get people to be willing to tender it to you. And then you got to do the math on that.
Jared Shaw
Yeah. Okay. And then I guess just finally for me. You talked about the yields on new loans and the opportunities there. What's going on with the spreads on new loans? Are you seeing spread compression with competition at this point or are spreads holding up?
Jared Wolff
I'd say a little bit. I mean, look just to throw a couple of numbers out there, but the numbers are still pretty good. I mean, our multifamily I would say is where you would see the spread compression, the permanent multifamily loans is where we're seeing spread compression. But on all of our other areas are really in the mid-sevens, and higher. And so they're holding up really, really well multifamilies, low to mid-sixes right now. And maybe even lower.
I think Fannie and Freddie are doing permanent financing in the mid-upper-fives and we have 5 billion in multifamily. And we got a project called Project Reset where, when these loans are coming up for maturity, we go out to our borrowers, and we ask them if they want to keep their loan with us and the benefit is they don't need to do a reappraisal.
And you know, the documentation is a lot easier and so they should be willing to pay us a little bit more than going through that whole process with an agency where they're also tied up for a while. We're doing three years at between 5.90%, 6.10% or 6.15%, which we think is a pretty good rate, but that's where we've seen more of the compression.
Jared Shaw
Great. Thanks a lot.
Jared Wolff
And, by the way, those loans are coming off at the low force. So we're keeping our portfolio flat. We're getting a nice uptick in price. We already know these loans. They're performing well. There are no problems. We're not taking any loans that, have any scars on them. We're not setting it out too far out and we're getting a nice uptick in and pick up in yield.
Operator
Chris McGratty, KBW.
Chris McGratty
Oh, great. Just a quick follow up on the margin. Within the guide of 3.20% to 3.30%, what's the level of a creation income that's factored in there?
Joseph Kauder
It's just our baseline. Yeah, it's our baseline accretion. There's nothing accelerated in there.
Chris McGratty
Okay. So we can use the schedule you guys provided. I think it was last spring as kind of the annual cadence for NII.
Joseph Kauder
I have to go back and yeah, I believe so. I don't think accretion goes down a little bit each quarter, right? Because as stuff does pay off and the bound, then the baseline get a little bit smaller every quarter. So the total accretion for 2020, like in the 2025 plan, is a little bit below. What is an actual we actually experienced in 2024.
Jared Wolff
Okay, thanks.
Operator
Thank you. And this concludes today's question and answer session and today's conference. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
