Brett Brbovic
Thank you, Nitin. Slide 7 shows an overview of 2024 metrics versus 2023. Our operating earnings were $94.9 million or $2.22 per share. On an annual basis, fees were up 21% and operating non-interest expense was down 3%. Provision expense for credit losses were $24 million down $8 million from 2023, all while increasing our allowance for credit losses to 122 basis points, up 5 basis points.
Turning to slide 8, we show fourth quarter metrics. Operating earnings were $26 million or $0.60 per share, up $0.02 linked quarter and $0.13 year-over-year. Net interest income of $86.9 million was down 1% linked quarter. Operating interest income was $23.2 million up 8% linked quarter. Operating expenses were $71 million down 2% linked quarter and down 6% year over year. Our fee, credit, and expense trends continue to be strong and compare favorably to peers. Net charge-offs were $3.3 million or 14 basis points of loans. Provision expense was $6 million and the reserve coverage ratio of 122 basis points was flat linked quarter. Our ACL to non-performing loans increased to 469%.
Slide 9 shows our average loan balances. Average loans were up $38 million linked quarter and up $281 million or 3% year-over-year. Average growth was lighter this quarter as we sold $47 million of our upstart consumer portfolio, had higher pay downs in the multifamily portfolio, and a couple of commercial closings that were pushed to the first quarter.
On an end-of-period basis, loans were up 2% linked quarter with growth primarily in C&I and commercial real estate. We've updated a page in the appendix, which shows the Upstart and Firestone runoff portfolios. The combined runoff portfolios are down $119 million or 71% year over year to $48,000,000 or 50 basis points of loans.
Slide 10 shows average deposit balances. Average deposits increased $299 million or 3% linked quarter. End-of-period deposits were up linked quarter, primarily due to seasonally high payroll money market balances. Excluding payroll and brokered CD balances, end-of-period deposits grew 3% quarter over quarter. Year-over-year deposits were down 3% or $277 million, primarily from the New York branch sale, which closed in the third quarter. Adjusting for the $383 million of sold deposits from the branch sale, deposits were up 1% year-over-year. Average non-interest-bearing deposits as a percentage of total deposits remained at 24%, consistent with the prior two quarters.
Turning to slide 11, we show net interest income. Net interest income was down 1% linked quarter and down 2% year-over-year. Net interest margin was down 2 basis point linked quarter to 3.14% and December spot NIM was 3.18%. While we have headwinds of floating rate loans repricing lower short term, we also have several tailwinds. We have $1.5 billion of CDs or 59% of that book maturing in the next six months.
We have $600 million of wholesale funding that matures over the first half of 2025. And further, we have $600 million of low yield received fixed swaps maturing over 2025 and 2026, with about half in 2025. Finally, we also have low yield fixed rate securities and loans that will mature and reprice at higher yields.
Slide 12 shows our operating non-interest income up $1.7 million or 8% linked quarter, and up $6.5 million or 39% year-over-year. Year-over-year comparisons reflect the change to PAM accounting for our tax credit investment business. The growth in fees quarter over quarter was primarily driven by higher gain on SBA loan sales. We also had higher BOLI revenues and seasonal revenue sharing fees this quarter, which came in about $1.5 million above normalized run rate. Deposit related fees declined linked quarter due to the New York branch sale. This was the fourth quarter in a row where we've seen solid growth in overall fees.
Slide 13 shows expenses. Operating expenses were down 2% linked quarter to $71 million and down 6% year-over-year. Year-over-year expense declines were broad based. Linked quarter, a decline in compensation, and occupancy and equipment were offset by higher marketing and professional service expense.
Slide 14 is a summary of asset quality metrics. Non-performing loans as a percent of loans were 26 basis points, which were flat linked quarter, and up 2 basis points year-over-year. As Nitin mentioned, total delinquencies and non-performing loans were 52 basis points of total loans, the lowest percentage in almost 20 years. Net charge-offs of $3.3 million were down $2.3 million linked quarter and down $1.1 million year over year.
Slide 15 shows that our CRE book remains well diversified in terms of geography and collateral. Our CRE concentration ratio was approximately 294% and credit quality of the CRE portfolio remains solid with non-accrual loans at 22 basis points of period end loans.
Slide 16 shows details on our office portfolio. As noted last quarter, the weighted average loan-to-value ratios are about 60% and a large majority of the portfolio was in suburban and Class A space. We have very limited exposure to Boston's financial district and no exposure to high rise office buildings.
Slide 17 shows details of our multifamily portfolio. The multifamily portfolio was $637 million or 6.8% of loans. The book is well diversified across our footprint with a weighted average loan-to-value of about 65%. While current credit quality metrics are strong, we recognize that economic uncertainties exist, and we are monitoring both new originations and existing portfolios carefully.
Turning to capital, we have strong capital levels. Tangible book value per share was $24.82 and increased 1% linked quarter and 9% year-over-year. Our CET1 ratio was up 110 basis points to 13% and our TCE ratio rose 30 basis points to 9.4%, this due to the equity offering and higher retained earnings.
As you know, we raised $100 million in equity in December as part of our MOE announcement. The raise improved our standalone capital ratios to support the merger and we issued about 3.4 million 0 shares. We were encouraged by the demand for the offering and the narrow 3.9% discount.
Our top capital management priority remains supporting our organic loan growth. Year-to-date, we've repurchased $17.4 million 0 of stock at an average cost of $21.94. All of our repo in 2024 was done in the first half of the year and was completed below tangible book value per share. Currently, we do not anticipate repurchasing shares going forward until our merger closes.
Given the pending MOE transaction in the second half of 2025, we will not be providing line-item income statement and balance sheet guidance for the upcoming year as we've done in the past. That said, we are encouraged by the momentum in our financial metrics and confirm comfort with the consensus net income cited in the December 16 merger presentation for 2025.
And with that, I'll turn it back to Nitin for further comments. Nitin?
Nitin Mhatre
Thank you, Brett. In summary, we had a strong fourth quarter and a solid year in a challenging macroeconomic environment. Fee revenues, expenses, and credit came in ahead of our expectations from a year ago. While net interest income was down, the yield curve was steepening and this will serve as a meaningful tailwind for our NII and operating leverage in the coming year.
We are entering 2025 with a strong momentum across key business metrics. I'm truly proud of what our team has accomplished and how far we've come since I joined as CEO four years ago. We've streamlined our operations by exiting non-core businesses and processes, optimized our footprint through consolidation and pruning of our branch network along with rationalization of legacy corporate real estate across the footprint. And we've gotten our loan growth and more recently our deposit growth engines running well. We've invested in technology and digitized our offerings to improve the client experience and relationship deepening.
I'm excited about the potential for the combined Berkshire and Brookline franchises. The combined entity will provide more growth opportunities for our employees, continued commitment to our communities, enhanced products and services for our customers, and significantly higher profitability and returns for our shareholders.
With that, I'll turn it over to the operator for questions. Operator?
Operator
(Operator Instructions) David Bishop, Hovde Group.
David Bishop
Hey. Nitin and Brett and company, just curious, a really good quarter here on the loan growth side. Just curious, I don't know if you can ring fess, it maybe how much of that, what percent contribution was maybe from some of the new hires that you guys have been adding over the past year or so?
Nitin Mhatre
Yes. I think at a high level, to begin with, the bulk of the growth came in from our commercial book and within that the good news part was also it was pretty well balanced. So, it came on a broad based. C&I grew actually faster than our CRE book. A lot of this production was again from both existing and new bankers. So, I wouldn't give a specific mix for that, but I think it's all cylinders firing at the same time.
David Bishop
Got it. And then just curious, as you've added these senior bankers. Has the average loan size and relationship they're booking moved appreciably since the beginning of the year?
Nitin Mhatre
No. It's been relatively steady. Our credit box and holding limits haven't changed, so it's pretty steady through the year.
David Bishop
Got it. And then I know the end of the quarter, as you noted can be impacted by payroll deposits. Do you have like a dollar amount how much they were sort of elevated relative to norms?
Brett Brbovic
Yes, I think, on average, they were probably up about $500 million from they usually are right around $1 billion on average, and I think that the year end, we were up about $0.5 billion.
Nitin Mhatre
And Dave, that has been consistent. If you look at all three years of 2024, 2023, 2022, payroll ends up at about $1.5 billion. So that's about $500 million as Brett said compared to the normal months in the quarter.
David Bishop
Got it. And it looks like obviously with the Fed being aggressive here in the fourth quarter and the December margin at 3.18% sounds like there might be some tailwinds not only on the loan side, the borrowing side, but also deposits. Just curious if you still see some progression downward on the funding cost side on the interest-bearing deposits. Thanks.
Brett Brbovic
We definitely do. We are expecting some modest expansion in the NIM as we move forward into Q1, primarily through decreases on the funding side.
Operator
Billy Young, RBC.
Billy Young
Just to follow-up on David's question just on the deposits. Understanding the seasonal lift from payrolls, the core growth still looked pretty good. It seems like you're getting some traction on kind of your deposit gathering efforts. So, can you just maybe elaborate on kind of what you think the deposit opportunity this year is? You kind of mentioned some of the wholesale fundings maturing later this year. So, do you think you'll be able to kind of generate enough core deposit growth to kind of offset some of that? It just feels like you're getting a lot of momentum here on the deposit side.
Nitin Mhatre
Thanks. Yes, Billy, I'll just give you a macro view of the growth itself. So, the average growth, right, so that normalizes for the spikes at the end of the quarter. The average growth was 3% and then you could look at it two different ways, product view and the channel view. Products, pretty much across all products, there was growth, including DDAs growing by about 2% and between DDA, savings, money market, CDs, the growth was about 2% to 5%, so that kind of blended to that 3%. So, broad based product growth.
And in terms of the channels, the biggest growth outside of payroll came from commercial and private bank, retail and also the new digital channel that was launched that roughly contributed over 15% of retail deposit generation in the quarter. So, very broad-based kind of growth and we are hoping that, that momentum continues.
Billy Young
Great. Thank you for that. And maybe just kind of going back to the other side of the balance sheet, just on kind of looking at loan growth drivers for the year. You mentioned a couple of modest headwinds this quarter, but underlying growth also looked pretty solid there. It seems like things are picking up on the commercial side for 2025.
So, can you just talk a little bit about general commentary on just kind of underlying what you're seeing in terms of underlying activity, and maybe a little bit on customer sentiment and kind of how do you balance the building strength in C&I against maybe some of the need to kind of control commercial real estate concentrations ahead of the book line deal?
Nitin Mhatre
Yes, I'll start off and Brett could provide more color on the forward look. So, I think the growth again broad based in the lending portfolio. C&I actually grew at a faster pace than 3%. We did actually offload the part of the consumer portfolio in the quarter. So, I think that kind of brought the growth rates down. So normalized, it is about 1% or so or 2%, closer to 2% growth in the quarter on an end of period basis.
So, we do expect to see the momentum going. The pipeline was actually lower quarter over quarter, but year-over-year it was about 20% higher. So, it feels like on a seasonal basis, there is momentum. Our teams are being very judicious. Our CRE team that has done an exceptional job managing, the serving our clients while managing the balance sheet judiciously. We continue to keep it at or below that 300% of risk-based capital, and I think that will remain to be our kind of the operating guideline. And C&I, we're seeing some real good momentum between C&I and ABL teams. So, I think that momentum should continue and Brett could give more color around how we expect that to expand the margins going forward.
Brett Brbovic
Yes. And I think we do see that happening in the first quarter. I think we expect some decent balance sheet growth heading into Q1 2025, allowing our NIM to expand in the first quarter.
Billy Young
Great. Thank you. And just one follow-up question. Any commentary on just kind of near-term expense expectations?
Brett Brbovic
Yes, I think we've shown pretty good momentum on the expense side over the last few quarters. We expect to see that momentum continue into 2025 with no real significant changes in that as we move forward.
Operator
Chris O'Connell, KBW.
Chris O'Connell
So, just wanted to start off on credit. Obviously, this quarter, after all the recent actions came out really good and kind of below the recent trends. Given the disposal of the majority of the upstart portfolio and just kind of the recent progress here. Do you guys think the normalized kind of net charge-off rate going forward is down a bit than the past few quarters?
Nitin Mhatre
I think the normalized charge offs for us, we believe, should be in the range of 20 basis points. So, we've had couple quarters better than that, but we believe it normalizes at around 20 basis points range up, Chris.
Chris O'Connell
Okay, great. And then I know the office portfolio has been performing very strong and isn't too big for you guys, but it looks like about 22% and another 19% are maturing in 2025, '26, and I think the entire portfolio is about 4.7% criticized. Can you just give us a sense of how much of that criticized portion is within the ‘22 or the ‘25 and '26 maturities?
Nitin Mhatre
Greg, you want to give some color there?
Gregory Lindenmuth
Yes. Actually, none at all in 2025.
Chris O'Connell
Okay, great. And nothing on 2026 either?
Gregory Lindenmuth
There is a small credit in 2026, $3 million.
Chris O'Connell
Okay, thanks. And just you guys mentioned the digital deposit efforts. I was wondering what that overall balance is and then, what the cost of that is just compared to the overall deposit portfolio?
Nitin Mhatre
Yes. Well, I'll ask Sean to give some color there.
Sean Gray
Sure. We're very focused on pricing that portfolio similar to the offerings we have in both our retail and commercial bank. We're pleased that the average deposit size is also mirroring our retail account opening, and the average DDA size is also much better than national trends. So, the program is relatively new. We are up over $60 million in digital deposits with some good, and Nitin mentioned the good growth rates this quarter. So, we're pleased that we've got good momentum, and we hope that pipeline continues into next year.
Nitin Mhatre
And Chris, just to maybe add a little more color to this, I think some part of this program that is launched by the team also kind of leverages the investments that we made in our technology stack, and I think that allows us to do this more effectively. So historically, you've seen most of the banks have struggled to keep right amount of balances in digital deposits, have higher attrition, have higher fraud. And I think we addressed that. We took all those learnings, leveraged our tech stack and have built a pretty robust program. Like Sean said, we feel pretty good about the momentum we're seeing across those metrics.
Chris O'Connell
Okay. Thanks, Nitin. And then just wanted to follow-up. I know there's no full-year guidance, but just getting a little bit more granular into next quarter given branch shell and kind of the various moves over the past couple of quarters. I mean, as far as just going into Q1, how you guys are thinking about the expense run rate?
Brett Brbovic
Yes. I think we've had a lot of positive momentum with expenses over our recent history. I think we were going to continue that as we move forward. That's obviously a point of focus for us. We meet regularly to make sure that we're spending every dollar as effectively and efficiently as possible. So, I would expect to see that momentum continue.
Operator
Laurie Hunsicker, Seaport Research Partners.
Laurie Hunsicker
Maybe just starting over, and your other income, the $4.9 million. How much of that was BOLI death benefit there?
Brett Brbovic
I think BOLI was about almost $1 million higher than our normal run rate, quarter over quarter.
Laurie Hunsicker
Okay. And was there anything else non-recurring in that?
Brett Brbovic
We did have some seasonally high revenue sharing fees, but that is that's a seasonal thing that comes in usually at the end of fourth quarter every year. Another thing, quarter over quarter, I would say those are kind of the two pieces that drove the increase, but I wouldn't say anything, BOLI was probably the most significant component of that.
Laurie Hunsicker
Okay, great. Thanks. And then, just going back to sort of normalized charge-offs and also, Upstart and Firestone, which I'm very happy you guys continue to provide the detail. That's helpful. Can you just help us think about, though, these two books have combined been half, three quarters, and some quarters even more of your charge offs, right?
So, after that, your charge-offs have been actually tracking single digits. So, I guess question on normalized charge off, is that a stripping that out number or that's including that in when we're looking at 20 basis points? And then ahead of ahead of the Brookline MOE, again the Upstart and the Firestone bleed, and it was great to see the Upstart sale on October 16. But the -- can you just refresh us, what are the reserves on those two books, and why not just write them off, sell them for whatever gets them done before you close so that headache is completely in the rearview mirror? How are you thinking about that?
Brett Brbovic
Greg, you want to start it off and I'll jump in as well?
Gregory Lindenmuth
Sure. Laurie, those are embedded in in that expectation of normalized charge-offs. Firestone has been really performing better than expected. So, we don't really see any issues in the Firestone book and we actively are looking at possibly selling the remaining book of the upstart as well. Our reserves for the upstart are probably in excess of 50% of the balances that are outstanding now.
Laurie Hunsicker
Okay. Great. So, basically, if we think about normalized charge-off, so that number. It's still single digits. It's not 20 basis points. Are you guys there?
Brett Brbovic
Laurie, I think, what no, yes, we're there. Though, I think 20 basis points is what we believe to be the normalized run rate. I think our 10-year average has been about 35, 37 basis points. We believe embedded quality is stronger. So, I think we don't expect continue to see 7 and 14 basis points type of charge-offs. So, I think the normalized run rate could be 20 basis points.
Laurie Hunsicker
Okay. Notwithstanding the fact, Upstart has been like three quarters of your charge-offs quarter after quarter after quarter?
Brett Brbovic
Correct.
Laurie Hunsicker
Okay. And then just last question, thinking about the closing, and I don't know if this is a Paul and Karl question, but we are seeing much, much faster approvals rolling through the latest, the third largest merger announced in 2024, the [AUVSASR] deal, seven weeks after filing their application, they get set approval even ahead of the state approvals, right? So, they were supposed to close in the third quarter of ‘25. Now they're closing April 1, 2025. Can you help us think a little bit about the timing? Are we going to see a faster closing here? How should we be thinking about that?
Nitin Mhatre
Yes, I think and Laurie, you have a good lens of this and we look at the same numbers. And yes, I believe the general feeling is that the regulatory approvals might be faster, especially in the new administration compared to the previous one. It's just impossible to predict how much that is. I think both our, both of us combined parties estimated that to be the end of third quarter, but it very well could be sooner, but we just can't forecast that.
Operator
Mark Fitzgibbon, Piper Sandler.
Gregory Zingone
Good. Quick questions. Could we see any other balance sheet actions that you guys might do to prepare for the MOE?
Brett Brbovic
No, there is nothing on the radar.
Gregory Zingone
Okay. And secondly, just looking for the next few quarters, I saw the tax rate was elevated in 4Q. Would you kind of be able to give us an idea on how we should be thinking about it for 1Q, 2Q and 3Q?
Brett Brbovic
Yes, sure. Taxes were a little bit elevated obviously this quarter because of some non-deductible merger expenses that drove up the rate here in Q4. I think that's what pretty much drove it to the 26%. I believe we're still expecting to be around the 22%, 23% tax rate, for 2025 and going forward.
Operator
David Bishop, Hovde Group.
David Bishop
Yes, just a couple of follow ups, either for Nitin or Greg. You alluded to the change in administration here, and obviously there's been a lot of table rattling, in terms of downsides of the federal government, especially as it pertains to the real estate. Any exposure to the federal government or agencies that could be affected by the potential GSA downsizing within your footprint?
Nitin Mhatre
Greg?
Gregory Lindenmuth
No, that's a good question. I mean, we do have leases with government agencies. The positive part of the leases is that they're very long term. The termination clauses in a lot of the cases will equal the amount of payment. So, very steep termination clause. So, we have that embedded protection built into the loans associated with any government leases.
David Bishop
Got it. And then sticking on sort of the loan question, just curious, new originations this quarter versus last and if they've moved appreciably either up or down post quarter?
Nitin Mhatre
So new originations were about let me just give you one second, the exact numbers there. Yes, they were modestly higher in terms of commitments on the commercial side and as well as consumer side. So, modestly higher in the fourth quarter compared to third quarter.
David Bishop
They moved much, I know it's early in the first quarter, but has there been much movement post quarter?
Nitin Mhatre
No. But I think as Brett mentioned in the script, there were a couple of deals on the commercial side that pushed into the first quarter, so there will be a little bit of a head start there. But the pipeline, again, year over year was up 20%. So, I think that's normal. We think it should be similar kind of a trajectory as we saw in the first quarter of last year.
Operator
This concludes the question-and-answer session. I'll turn the call to Nitin Mhatre for closing remarks.
Nitin Mhatre
Thank you all for joining us today on our call and your continued interest in Berkshire. Have a great day and be well.
Operator
Thank you. This concludes today's conference call. Thank you for joining. You may now disconnect.
